Tata Vs Mistry: What Happened At The NCLT So Far

The first round of arguments in Cyrus Mistry's petition against Tata Sons Ltd. ended with the ousted chairman reiterating that he was removed for raising issues of mismanagement. The Tata Group's holding company rebutted the arguments, saying Mistry was party to most of the decisions he had cited.

Two Mistry firms, which have filed the petition on his behalf, will now be given a second chance to put forward their case and rebut Tata Sons' contentions.

The National Company Law Tribunal began hearing the petition in November after the appellate tribunal granted the Mistry firms waiver from the 10 percent shareholding requirement to pursue oppression and mismanagement charges against Tata Sons. The dispute stems from Mistry's removal as Tata Sons chairman in October 2016 and later as a director.

The Mistry firms are represented by Senior Counsel Aryma Sundaram while Cyrus Mistry is represented by Janak Dwarkadas. Senior Counsel Abhishek Manu Singhvi appeared on behalf of Tata Sons, while Senior Counsel SN Mukherjee, Mohan Parasaran, Sudipta Sarkar and advocate Zal Andhyarujina represented various trustees of the Ratan Tata Trust and Sir Dorabji Tata Trust—that collectively hold over 66 percent in the company.

Here are some of the arguments made by the two sides...

On Mistry's Removal As Chairman, Director

Mistry's Arguments:

• Removal of Cyrus Mistry as chairman was without reason and amounted to the majority shareholders suppressing the right of the minority to ask questions about matters involving the company.
• Cyrus Mistry was removed as a director of Tata Sons' board for approaching the NCLT with this petition. If legal recourse was not taken to protect the interest of minority shareholders against acts of oppression, then Mistry wouldn't have been removed as a director.

Tata's Rebuttal

• Mistry's removal was because board lost confidence in him. He intentionally and in bad faith leaked sensitive and confidential information causing loss in Tata Group's market value. He was appointed at the behest of Tata Trusts and his removal cannot be questioned by minority shareholders.

Interference By Trustees

Mistry's Arguments

• The matters that pertain to the company are decided by the trustees and not the board, making it a “dummy” board. The trustees even control the boards of other Tata Group companies, some of which are listed.

Tata's Rebuttal

• Trustees being persons of high repute and significant experience served as advisers to the Tata Group companies. Mistry himself sought such guidance. It was only after his removal that such guidance was deemed “interference” and considered oppressive.

Mismanagement Involving C Sivasankaran

Mistry's Arguments

• Mistry's counsel argued that C Sivasankaran, said to be a close aide of Ratan Tata, was allotted shares of Tata Teleservices Ltd. at a significant discount along with other benefits aggregating to over Rs 1,000 crore. Mistry's proposal to litigate against Siva was a contributing factor to his ouster at the next board meeting.

Tata's Rebuttal

• The Shapoorji Pallonji Group, owned by Mistry's family, also benefited from investing in Tata Teleservices at a price lower than Siva.
• In 2013, Mistry-directed diligence of Siva-related issues proved no wrongdoings.
• After Mistry's removal as chairman, Tata Sons took legal action against Siva, negating the argument that fear of such an action against Siva led to Mistry's ouster.

Mehli Mistry

Mistry's Arguments

• Mehli Mistry, said to be close to Ratan Tata, secured secure several commercial contracts in spite of not having any prior experience in the field. These contracts were not as per industry standards and jeopardised the commercial interests of Tata Power. Cyrus Mistry's counsel argued that it was another instance of mismanagement.

Tata's Rebuttal

• Tata Sons' counsel argued that these contracts were approved by the board when Cyrus Mistry was on board and were awarded on a competitive basis, in accordance with due process, as reflected in the independent auditor's report.

Loss-Making Nano Project

Mistry's Arguments

• The loss-making Nano project was not discontinued although agreed to by the board of Tata Motors. Ratan Tata's emotional reasons were cited for not shutting down the business, calling it an example of mismanagement.

Tata's Rebuttal

• The Nano project–admittedly a wrong decision–was still a commercial call and cannot amount to oppression even if it adversely affected the price of shares.
• Ratan Tata was not opposed to shutting down the project and it was Mistry who wanted to evaluate improving the Nano project and minimise losses without termination.

Affairs Of Air Asia

Mistry's Arguments:

• Affairs of AirAsia India were conducted in a fraudulent manner with several regulatory irregularities. As Mistry was trying to clear up AirAsia India mismanagement and fraud, he was removed as a chairman of Tata Sons.

Tata's Rebuttal:

• Tata's counsel argued that fraud was conducted by Mittu Chandilya and legal action was taken against him by the company.
• To contradict the claim that Mistry was removed because he acted as a whistleblower, Tata's counsel relied on Deloitte's forensic report that raised the issue and was laid before the board in April 2016, before Mistry was removed.

Plan To Convert Tata Sons Into A Private Company

Mistry's Arguments:

• The conversion of Tata Sons to a private limited company will further oppress the minority shareholders. It will remove the requirement of Tata Sons to comply with certain stringent provisions such as appointment of independent directors and will allow the company to restrict transfer of its shares.

Tata's Rebuttal:

• Tata's counsel argued that the Companies Act gives Tata Sons the option to convert into a private limited company, which is the intention of the majority shareholders. This, they said, cannot be considered oppressive specially since the Mistry firms had investment when the company was private limited.