Supreme Court Bench with three Judges including the Chief Justice has given a landmark judgment in the Tata Group vs Cyrus Mistry case which has been dragging on for quite some time. The Tata group under the able stewardship of Ratan Tata had appointed Mr. Cyrus Mistry of Pallonji group as the Group Chairman of Tata’s years back. But unfortunately, Mistry could not sustain himself or gel with the Group’s culture, philosophy, and style of operations and functioning. So the Tata Group had to show him the exit door which Mr. Cyrus could not digest and take it easy. He constantly stepped into all possible legal tangles challenging the decision of Tata’s. In fact, he won in one or two rounds but finally had to give up.
Now It is a big win for Tata Sons in the legal battle against Cyrus Mistry. The Supreme Court in its judgment has allowed the appeal of Tata Sons and dismissed the plea filed by the Pallonji Group.
This means the NCLAT judgment of 2019, which had restored Cyrus Mistry as the executive chairman of the conglomerate, has been set aside.
The apex court has also said that it can’t adjudicate on fair compensation to Pallonji Group for their shareholding. Both parties can decide between themselves under the provisions of Article 75 of the Articles of Association.
For context, the Pallonji Group has been in talks with lenders for a debt recast and has been pushing to sell its 18.37 percent stake in Tata Sons. Article 75 gives Tata Sons the right to the first refusal.
They also spoke about the terms of the separation, the role of Article 75 and the various technicalities on that, and the options available for Tata Group to pay back the Mistry’s and relieve them of 18 percent shareholding in Tata Group.
The prime takeaway of this episode is that as long as a Corporate company functions with clearly laid down policies and vision keeping the Corporate Governance mechanisms intact the aberrations of this kind that happened in Tata’s could always be challenged and that would end favorably. So strengthening CG initiatives is the sine qua non for sustainable growth and development for any organization big or small which Tata Group is wedded to. This judgment would certainly enhance the image and credibility of Tata Group which might be reflected in the Bourses in the days to come!
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