Mistry’s removal as Tata Sons chairman ‘illegal and oppressive’: SP Group to SC

The Shapoorji Pallonji Group on Wednesday told the Supreme Court that the removal of Cyrus Mistry as the chairman of Tata Sons was illegal and oppressive. Senior counsel Shyam Divan told a bench led by Chief Justice SA Bobde that the removal was also against good faith and trust and the long relationship which Tata and Shapoorji Pallonji group had developed over five decades. The SP group said Mistry had served in an exemplary manner for 24 years in the group and wants just directorship.

The SP group alleged that due procedure wasn’t followed in 2016 when Mistry was removed from his post as the chairperson. “There was no agenda for removal of Mistry at the October 24, 2016, board meeting. No notice of intended removal was given to Mistry. His removal had nothing to do with any lack of performance. No reasons were discussed nor any minutes of the board meeting noted it,” Divan argued.

He further said Ratan Tata was determined to remove Mistry and that is why three people were made trustees on the same day when Mistry was to be removed. He also said the two directors had praised Mistry for his performance as executive chairperson four months before his removal. The senior counsel said various articles of association were breached and that the termination of an MD should not have taken place without a resolution and the same process, which is followed at the time of appointment, should have been followed.

Divan further said the management of company is the board and the most crucial obligation imposed on a director now is that the director is a fiduciary. “A fiduciary’s allegiance is to the company alone… If you are torn between allegiance to company and allegiance to something else, then you cannot act as a director,” he said.

“Director cannot abdicate or yield on his/her independent judgment. Director may consult or take advice but has to act independently and cannot be compelled or coerced,” Divan told the SC. “The relationship was of one utmost trust and good faith. The only thing we asked for was a place on the board which is recognised under the Companies Act of 2013,” he argued. The hearing will continue on Thursday.