The high stakes battle in the $111 billion Tata empire just got messier with a surprising ruling by NCLAT, the company law arbiter, under which Cyrus Mistry was reinstated as executive chairman of group. But sensational as it sounds, it’s open to question whether the appellate body has the power to force a private sector company, albeit a public limited company that converted into a private company, to follow a sweeping order of this nature. It will be interesting to see if Mr Mistry would indeed take his place at the top of the table in India’s oldest established corporate behemoth, if only to prove a point in his running war with 82-year-old chairman emeritus Ratan Tata.
The point to ponder is if a private company is not its own master in any circumstances, which this ruling is upending. The issue is certain to reach the Supreme Court soon, and it should be noted that some major NCLAT rulings have been overturned there. At issue in the Tata Sons case is whether there was oppression of minority shareholders and if the chairman's ouster was mala fide.
The NCLT has over time acquired standing in passing orders on the maltreatment of minority shareholders as well as protection of directors. It’s a fact that Mr Mistry’s ouster was not done in a transparent way by a vote at a shareholders’ meeting. While the Tatas may have had cause to move against Mr Mistry’s perceived misgovernance and oppose the direction he was pointing the company towards, the issue could have been handled more appropriately than like a kangaroo court.
The matter might be resolved on complex legalities and who can say clout will not prevail even if Mr Mistry’s fight was to establish the point that no individual, however mighty, is greater than the institution....