Why Mistry’s oppression case failed in Supreme Court

The Supreme Court has completely dismissed all charges of oppression and mismanagement brought by entities belonging to Cyrus Mistry against Tata Sons Pvt.

Not only that, the court went so far as to suggest that there was never a case to begin with. That the original cause of action was the dismissal of Mistry as president of Tata Sons. Everything else was a disguise of this cause.

“Although the complainant companies supplemented their actual grievance with various historical facts to make a deceptive appearance, the proxima cause of the complaint was the removal of CPM (Cyrus Pallonji Mistry) from the post of executive chairman.”

But dismissal of a president, or even a company director, is not a sufficient ground to determine oppression or harmful behavior, the supreme court said while overturning the appeal court’s decision National Corporate Law Code which found oppression and mismanagement and ordered Mistry’s reinstatement. .

While Mistry has brought several specific charges against Tata Sons in the oppression case, the Supreme Court has considered only a few. The court’s explanation for this was that the National Company Law Tribunal had dismissed each of the charges while the NCLAT had overturned only a few of the court’s dismissals. Since the courts are de facto courts and the Supreme Court of law, it limited its proceedings to the findings NCLAT reached.

Mistry’s accusations to show oppression:

  • Abuse of some articles and control exercised by Tata Trusts over the board of directors of Tata Sons

  • Retirement of Cyrus Mistry as Executive Chairman

  • Transactions with Siva and Sterling Group of Companies;

  • Air Asia

  • Transactions with Mehli Mistry

  • The losses suffered by Tata Motors Ltd. in the nano car project

  • The acquisition of Corus

As NCLAT did not overturn the last five NCLT dismissals, the Supreme Court considered the dismissal final. Against the background of oppression, he considered

– Resignation of Cyrus Mistry as Executive Chairman and Director

– Affirmative voting rights to the appointed administrator of Tata Trusts on Tata Sons

– Corporate governance and other articles including article 75

Dismissal of Cyrus Mistry

Regarding the dismissal of Mistry as executive chairman of Tata Sons, the high court noted that it is well established that certain failed business decisions or the removal of a person from his position as a director cannot be qualified as oppressive acts for minority shareholders.

In such a case (under section 241, 242 of company law), a court, said the court, cannot ask whether the deletion was correct / valid, but must see whether such deletion would amount to oppression of minority shareholders.

Both with respect to the Mistry oppression case and the NCLAT findings, the high court considered several aspects of the Tata Sons statutes, including rights such as affirmative votes, prior consultation with Tata Trusts .

He rejected every one of Mistry’s arguments and said the Tata Group was guided by corporate governance and had included many practices, such as board committees, etc., even though the law did not require it. not.

Article 121 of the Tata Sons Articles of Association grants affirmative voting rights to appointed directors of Tata Trusts in certain areas.

The higher court pointed out that these rights are a worldwide standard and that in this case they only confer a limited right to the appointed directors. If we stick to the shareholding, Tata Trusts with 66% could have filled the table, said the court, while noting that this was not the case.

Section 75 allows Tata Sons to resolve by special resolution the transfer of the shares of any shareholder. Mistry called this coercive. The Supreme Court considered it an exit clause. Further, he said section 75 had never been invoked and future actions were not covered by oppression.

Further, section 75 has been around for decades and Mistry himself was a party to an amendment in 2000 that gave section 75 its current form.

Prior consultation with Tata Trusts

The court ruled that given the charitable purposes of the Tata Trusts, their appointed directors on the Tata Sons board are not like other ordinary directors. He also questioned whether the need to have independent directors on the board itself was a recognition that all directors could not be expected to exercise fully independent judgment. whatever their name.

A designated administrator of trusts has a fiduciary duty to his beneficiaries.

Frequent changes in the case of Mistry

The higher court also detailed the Mistry party’s changing arguments across the five-year litigation over the search for certain remedies. Mistry’s reinstatement plea was subsequently amended to seek proportionate representation on the board. While challenging the affirmative voting rights of directors appointed by Tata Trusts to the Tata Sons board of directors, Mistry’s case sought the same rights for its SP group.

The court called the request for the same rights “pretty funny.”

Overall, the Supreme Court found no example to support the oppression case and overturned all of NCLAT’s findings and remedies.