Fiduciary of Tata, group because SC moves against aid to Mistry
Reeba Zachariah and Swati Deshpande | TNN
Mumbai: Apart from Ratan Tata, Tata Trusts vice-chairman Venu Srinivasan, TCS, Tata Teleservices and Tata Industries moved the Supreme Court on Friday with separate appeals challenging the NCLAT order of December 18, 2019. The ruling, among other things, directs Tata Trusts to consult the SP Group on appointment of Tata Sons' chairman in the future and also while naming directors for its board.
Srinivasan - trustee of Sir Dorabji Tata Trust and Sir Ratan Tata Trust, which together own over 50% of Tata Sons - said in his appeal that the NCLAT in “one stroke takes away from the Trusts their basic legal right as shareholders to elect directors of their choice. “The Trusts can elect directors of their choice under company law on the basis of their majority shareholding even if they had no nomination rights in the Articles of Association (AoA) of Tata Sons,” he said.
He also said that it is the prerogative of the shareholders (subject to any special provision in the company's AoA) to decide who they wish to appoint or remove as directors of the company. “Consensus and unanimity among shareholders in terms of appointment may be desirable, but as a matter of legal norm, shareholders decide by majority. This is the norm worldwide.
The NCLAT had instructed that Cyrus Mistry, scion of the SP Group, should be appointed on the board of Tata Sons, TCS, Tata Industries and Tata Teleservices (Tata Tele) - companies where he was stripped off his directorship. The order to reinstate Mistry as a director on the boards of companies for the rest of his tenure has created confusion in the working of the companies as his terms have expired, the Tata companies said in their appeals. Tata Sons too, on Thursday, had appealed against the NCLAT order.
The order also instructs the Trusts ’nominees to not decide in advance on any issues that may require a majority from the Tata Sons board or a majority vote at the annual shareholder meeting. Srinivasan said that this direction not only interferes with the statutory right of the shareholders, but also with the fiduciary duties of the directors. “It imposes conditions on the directors which are neither contained in the AoA, nor under the Companies Act.”
Srinivasan, who is also chief of TVS Motor, said the NCLAT has wrongly identified Article 121 of the AoA (which gives affirmative voting rights to Trusts ’nominees) as the source of alleged oppressive behavior of Tata Trusts against Mistry. “An affirmative vote gives the ability to say no, it does not give the power to take decisions.” Tata Tele said in its appeal that it was not a party to the proceedings either before the NCLT-Mumbai or the NCLAT and that the latter passed an order granting reliefs to Mistry which he had not even sought. “At the same time, it has been denied the opportunity to defend the justified and lawful removal of Mistry as its director,” it appealed. Tata Tele said “any extension of the tenure available at the time of initial appointment’ ’would be beyond the NCLAT jurisdiction and would need to be set aside for that reason alone.