Last week, the National Company Law Appellate Tribunal (NCLAT) pronounced its ruling in the Tata-Mistry case. It held that the removal of Mr. Cyrus Mistry as executive chairman by the board of Tata Sons was illegal, and called for his reinstatement to that position. It also decided that consequential actions taken in the interim, including the appointment of a new executive chairman were illegal. In doing so, the NCLAT overturned an earlier decision by the National Company Law Tribunal (NCLT) in Mumbai, which did not find any case of oppression in the conduct of the board and majority shareholders of the company.
In a column in BloombergQuint, I offer a critique on some of the conceptual and doctrinal aspects of corporate law emanating from the NCLAT’s ruling. I do so in two parts. First, in considering whether there has been a case of oppression, the NCLAT does not take into account crucial aspects such as whether Tata Sons is a “quasi partnership”. Moreover, the NCLAT does not discuss the law relating to oppression in the required depth. It is true that oppression claims are unduly fact-centric, but a review of the NCLAT ruling gives it the colour of being altogether impressionistic in nature.
Second, I discuss the role of adjudicatory bodies in devising the solution in oppression actions, which is to find a resolution to the stalemate in the company arising from the acrimony between shareholders. For reasons discussed in the column, the NCLAT’s ruling in the Tata Sons case has the effect of perpetuating the stalemate rather than getting rid of it.
Given the stakes involved, this dispute is certain to go to the Supreme Court. Apart from the broader corporate governance implications, one hopes that it will ultimately play a significant role in developing the jurisprudence in India on the minority oppression remedy.