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Cyrus Mistry Moves Law Tribunal Against Tatas, Alleges Shareholder Oppression
Ratcheting up his war against Tata Sons, ousted Chairman Cyrus Mistry has moved the National Company Law Tribunal alleging oppression and mismanagement of minority interest, a charge the holding firm of the $103 billion group denied and said it will contest
Photo Credit : PTI
Ratcheting up his war against Tata Sons, ousted Chairman Cyrus Mistry on Tuesday (20 December) moved the National Company Law Tribunal alleging oppression and mismanagement of minority interest, a charge the holding firm of the $103 billion group denied and said it will contest.
Mistry, who had on Monday quit from the board of six listed operating firms of the group ahead of shareholder voting on a resolution moved by Tata Sons seeking his removal, filed a petition before the NCLT alleging breakdown of governance, oppression and mismanagement of minority interest.
Following up his statement of taking his fight to a broader platform, Cyrus Investments Pvt Ltd and Sterling Investments Corp - two Shapoorji Pallonji Group entities - in the petition against trustees of Tata Trusts and directors of Tata Sons alleged abuse of articles of association by outsiders, breakdown of governance and loss of ethical value.
Citing sections 241 and 242 of the Companies Act, which deal with shareholder oppression and mismanagement, Mistry asked NCLT to "supersede the existing board of directors" of Tata Sons and appoint an administrator to look after its day- to-day affairs.
The petition sought appointment of a retired Supreme Court judge as the non-executive chairman and restrain interim Chairman Ratan Tata from attending board meetings and interfering in the affairs.
It also sought an investigation into role of Trustees of the Tata Trusts in operations of Tata Sons and the group companies and appointment of an independent auditor to conduct a forensic audit.
The petition also asked for restraining the search committee formed to look for Mistry's replacement, from acting any further. It sought a new panel to be appointed and no candidate selected by the existing search committee be appointed without the quasi-judicial body's approval.
Responding to the petition, Tata Sons said it will contest the allegations as it has "followed the highest standards of corporate governance in its operations".
It viewed "the Petition as an unfortunate outcome of the situation arising from Mr Mistry's complete disregard of the ethos of the Tata Group and Jamsetji Tata".
It further said: "Despite, Mr Mistry's recent assertions that it is not a personal issue, it is evident that it always has been for him a personal issue which reflects his deep animosity towards Mr Ratan N Tata."
The Tribunal has "the power to bring to an end the acts of oppression and mismanagement that have come to define the conduct of Respondent No. 2 (Ratan Tata), directors of Respondent No. 1 (Tata Sons)... the Trustee-Nominated directors and the Trustee," the petition said.
The petition, however, excluded Tata Sons directors Ishaat Hussain, Farida Dara Khambata and Cyrus Pallonji.
It alleged that Mistry was removed as Executive Chairman of Tata Sons without any notice and without any explanation at the behest of Ratan Tata.
It also alleged that specific independent director of some listed companies like Nusli Wadia, who acted independently and endorsed the good performance of the management, were "threatened" with oppressive action.
The petition goes on to level allegations on some of the deals of the Tata Group.
In his petition, Mistry prayed for superseding the existing board of directors of Tata Sons and appoint an administrator to look after the day-to-day affairs of the company.
It also sought the tribunal to "order an investigation into the role of trustees of Tata Trusts in the operations of Tata Sons and/or Tata group of companies as also in the functioning of the board of directors of the Tata Sons and/or Tata group of companies and prohibit the trustees from interfering in the affairs of the Tata Sons or Tata group companies".
The petitioner also sought appointment of an independent auditor to conduct a forensic audit and independent investigations into the "transactions and dealings" of Tata Sons with C Sivasankaran and his business entities and all transactions Mehli Mistry and his associated entities.
Bringing forth charges of insider trading, the petition also sought appointment of an inspector to investigate into the "breach" of SEBI (Prohibition of Insider Trading) Regulations 2015 in particular by Ratan Tata and N A Soonawala, Trustee of Sir Ratan Tata Trust and Sir Dorabjee Tata Trust.
It also sought the appointment of a forensic auditor to re-investigate "the transactions executed by AirAsia India with entities in India and Singapore to ascertain whether any proceeds have been diverted to any secret bank account of Mr Venktaraman" and submit a report to the tribunal to be referred to the Serious Fraud Investigation Office of the Ministry of Corporate Affairs.
The petition also claimed that "Tata Sons has suffered a loss of Rs 158.65 crore in purchasing shares of Tata Motors only to strengthen its ability to vote out Mistry as non-executive Chairman" of the company.
Stating that the acquisition of the shares was not in the interest of Tata Sons and its shareholders, it asked the tribunal to order Tata Sons "to bring back" the funds used for acquiring those shares.
Besides, Mistry also sought NCLT to restrain Tata Sons from initiating any new line of business or acquiring any new business in existing lines of business with its permission.
It also further prayed the tribunal to direct Tata Sons "not to demand and/or procure any unpublished price sensitive information from any listed operating companies within the Tata group".