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NCLAT has decreed the removal of Cyrus Mistry as Tata Group Executive Chairman as illegal and have reinstated him. What are the options for Tata Sons now?
The option obviously is to go and appeal. There is no other option. They have asked for four weeks to file an appeal to the Supreme Court because tomorrow is the last working day of the Supreme Court and Supreme Court will reopen only on the 2nd January. Therefore they will need time to get this matter heard and then the Supreme Court will decide whether or not to stay the part of the ruling about the appointment of Mr Cyrus Mistry as Executive Chairman and the removal of Mr Chandrasekaran. That will be decided initially and the matter will be listed for hearing on the facts of the case.
What is a little disconcerting is not that his removal was not proper or illegal or unconstitutional or against the Tata Sons resolutions and the Articles of Association, what is very damaging is to say that part of the ruling which says that substantial losses were caused to the Tata Group companies as a result of mismanagement. Now that is a worrying part really. If that is so, then obviously it will have very serious implications on the reputation of the Tata Group.
You see the removal is of course a technical issue, but the real issue is this whether he was removed because he pointed out that there were serious flaws in the management of the Tata Group prior to his taking over and therefore losses were caused to the Tata Group companies for which the group suffered. That he had to pay a price for pointing out mistakes.
The fact raises some very serious issues with regards to adding fire to Cyrus Mistry’s allegations that there were serious issues in mismanagement of the company and given that they have now set aside what has happened in the last board meet, does this leave things very open for misconstrument for uncertainty with regards to the companies?
It certainly brings out and opens a hornet’s nest. It is virtually opening a can of worms because Supreme Court will only look at the legal aspect, they will not go into the factual aspect. If factually losses were caused before Cyrus Mistry took over and subsequently Cyrus tried to reverse some decisions and was removed from his post, then it raises issues of facts.
The Supreme Court cannot overrule issues of facts, they can only go into issues of law. If those facts are there in the judgment in the appellate order of NCLAT, then it would be extremely damaging for the Tata Group.
We still do not know whether Cyrus Mistry in this case go for defamation damage. Also, we still do not know whether this move is going to be viewed prospectively or retrospectively. Is that slightly ambiguous right now?
Mistry can go for the damages for the remuneration which has been denied to him all these years after he was removed because his removal was illegal or was void ab initio according to NCLAT. Of course, he can claim damages for the loss of remuneration or reputation which he has suffered. Reputation is more important to him. I do not think Cyrus Mistry is going to care much for remuneration but his loss of reputation will be something on which he will certainly go in for damages, depending upon what has been stated on the factual issue by NCLAT.
So if NCLAT confirms what Cyrus Mistry said that before he took over, his predecessor had taken certain decisions which caused losses to Tata companies and that he was removed for trying to reverse the decision, then certainly it will be very damaging for the Tata Group. Mistry will say I have been vindicated and my reputation was damaged during the last few years and therefore he can seek damages.
If someone is a Tata shareholder, should one be worried? In the last three years, Chandra has tried to change the complexion of the Tata Group of companies. He is looking at merging Tata Food business, Tata Chemicals business into Tata Global. A lot of changes have happened in Tata Power. A lot of change has happened to Tata Motors operations. What is in store for the shareholder now because if the move comes retrospectively, every board decision can be challenged?
You are right but I think Cyrus Mistry also has high respect for Chandrasekaran and he might come to some type of a deal whereby his name is cleared. He may be given some damages and he may still allow Chandrasekaran to continue in his role voluntarily. Though Cyrus has been once again brought back into the Chair, he may voluntarily step down and say Chandrasekaran is doing a good job and being a well wisher of the Tata Group I would like Chandrasekaran to continue the good work.
That can be the best way to solve this problem once in for all because Cyrus Mistry’s name would be cleared and he would certainly become a hero once again. At the same time, he would be shown as a very gracious person if he allows Chandrasekaran to continue the good work that he is doing with the Tata Group.
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