Legal Shocker
Business Today|January 12, 2020
THE NCLAT DECISION TO REINSTATE CYRUS MISTRY AS TATA SONS EXECUTIVE CHAIRMAN HAS TURNED THE TABLES ON THE TATA GROUP. WHAT NEXT?
NEVIN JOHN

The National Company Law Appellate Tribunal (NCLAT) delivered a body blow to the 150-year-old, $110-billion, salt-to-software Tata group when it reinstated former chairman Cyrus Mistry, who was unceremoniously removed in October 2016. It also asked current Tata Sons chairman N. Chandrasekaran to resign. That’s not all. The appellate tribunal, whose decision can be appealed only in the Supreme Court, has ordered reversal of the Tata group’s decision to convert holding company Tata Sons into a private limited firm from a public entity. None of these were anticipated.

The NCLAT has, in fact, reversed the 2018 order of the National Company Law Tribunal (NCLT), which had dismissed Mistry’s petitions.

Tata group needs a stay from the SC against the NCLAT shocker within four weeks to maintain status quo. However, if the SC upholds any of the orders of the NCLAT, it will not just be a huge embarrassment but would also leave one of India’s largest groups, with over 100 companies, in disarray. The order tests the supremacy of Ratan Tata, who appears checkmated for now. It could also mean the Pallonji Mistry family, the second-largest stakeholder after Tata Trusts in the Tata group, may have a greater say. And it could leave current chairman Chandrasekaran in a spot.

What happens next? In his letter to Tata employees after the judgement, Chandrasekaran said, “Tata Sons firmly believes in the strength of our case and will pursue the appropriate legal recourse.”

Will Chandrasekaran have to step down immediately? Unlikely, unless SC concurs with the NCLAT. If the Tatas secure a status quo, he is likely to continue until the SC gives its judgement. As for Mistry, far from recapturing the chairman’s post, he is more focused on protecting his family’s 18.4 per cent stakeholder interest in Tata Sons, say sources. “Mistry is a mature man who fought for stitching up the wounded pride of his family. He wanted the family name to come clean,” says a source.

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