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Tata Sons Challenged NCLAT Judgement

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The Tata Sons petition, challenging the NCLAT judgement restoring Cyrus Mistry as Chairman, reiterates why Mistry had to go despite his claim on how majoritarianism prevailed which was prejudicial to the interests of minority shareholding.

It highlights that by October 24, 2016, Tata Trusts had completely lost their confidence in the ability of Mistry to lead the appellant (Tata Sons) and the Tata Group. It was felt that he did not possess the leadership characteristics to lead the Tata Group and the appellant in future. In this view of the matter, the Tata Trusts asked its nominees on the board of the appellant to bring a motion to replace Mistry as the Executive Chairman. The Trust’s Nominated Directors, on their own part, held a meeting on October 24, 2016 and agreed that a motion for replacement of Mistry should be brought in the Board meeting slated for 2 p.m. on the same date, i.e. October 24, 2016.

However, before initiating a formal process in the Board Meeting, it was felt
that it may be appropriate that Ratan Tata personally meet Mistry and request him to step down as Chairman of Tata Sons and provide a graceful exit. Accordingly, Ratan Tata and Nitin Nohria (a Trust Nominated Director) met Mistry and asked him to step down.

Throwing into stark relief the dramatic developments of that day, it goes on to add that proper standards and processes were followed and since Mistry declined to step down, the Board of Directors of the appellant, in their collective judgment, decided that in the interest of the future success of the appellant and the operating companies, it was time to effect a change. As such, the item regarding the replacement of Mistry was introduced in the meeting in accordance with Secretarial Standards-1, which allows the Board to take up a matter which was not included in the agenda with the permission of the Chairman, and with the consent of the majority of the Directors, which shall include at least one independent Director, if any.

The said standards further provide that the Chairman should not be present in the meeting if an agenda item concerning him is being discussed.

Citing how due process was followed, it adds that as Mistry was interested in the proposed agenda item (i.e. his replacement as the Chairman), the Board of Directors of Tata Sons first voted on whether or not a new Chairman should be appointed for the said meeting. This motion was carried by the requisite majority and Vijay Singh was elected as the Chairperson for the Board Meeting in place of Mistry.

The new Chairman of the meeting then proposed inclusion of additional agenda items. No director (except Mistry) voted against the inclusion of additional items and hence, this resolution was also passed with the requisite majority. Once the new agenda items, which included an item to replace Mistry as the Executive Chairman of Tata Sons, stood included in the business of the meeting held on October 24, 2016, the Board of Directors voted on the same. Pursuant to a resolution passed at the aforesaid meeting of the Board of Directors dated October 24, 2016, the Board of Directors, in exercise of the powers vested with them under the AoA, more particularly Article 118, 119 and 105 replaced Mistry as Executive Chairman of the appellant and Ratan Tata was appointed as Interim Non-Executive Chairman.

Summarising it states that it is pertinent to note that 7 out of 9 Directors (with one Director abstaining and Mistry himself being ineligible to vote), voted in favour of replacing Misty as the Executive Chairman of Tata Sons at the board meeting on October 24, 2016.

This reveals that apart from the three Trust’s Nominated Directors, even the 4 Independent Directors on the Board saw merit in the resolution for removal of Mistry, including two Directors – Ranendra Sen and Vijay Singh – who were two out of the three members of the Nomination and Remuneration Committee, who had previously reviewed the performance of Mistry on June 28, 2016, subject to the final approval of the Board of

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