Sakshi Chhabra
The Shapoorji Pallonji Group filed for a review petition before the Supreme Court challenging some parts of the verdict in the Tata sons Ltd v. Cyrus Mistry case. The move came on the last day to file such an appeal.
The petition challenges certain alleged errors in the judgement which had set aside the National Company Law Appellate Tribunal (NCLAT) that had reinstated Cyrus Mistry as the chairperson of Tata Sons Limited.
Shapoorji Pallonji holds 18.4% in Tata Sons, the holding company of the $100-billion Tata conglomerate, and Mistry was removed from the chairman’s post in October 2016 in a boardroom coup.
The petition is not a review of the entire judgment but some aspects of fact and law that are patent errors.
The SC judgment had also diluted certain provisions of the Companies Act, specifically section 166 which requires all directors to exercise independent judgment and discharge fiduciary duties in the interest of the company and not only in the interest of their nominators.
Tata Sons is controlled by Tata Trusts and the public charitable organization nominates a third of the directors on the board of the company.
The nominee directors enjoy affirmative voting rights on certain matters specified in the Articles of Association (AoA) of Tata Sons, including any matter affecting the shareholding of the Trusts.
The SC had observed that Trust’s nominee directors are “not like any other directors who get appointed in a general meeting of the company” and that they hold a fiduciary relationship with the Trusts and fiduciary duty towards the nameless, faceless beneficiaries of those Trust.
This SC observation, said corporate lawyers, suggested that the role and duties of directors of a charitable trust are different from those of other non-charitable trust members. Shapoorji Pallonji had contended that such affirmative voting rights enjoyed by Tata Trusts nominee directors breached the duties of directors under companies Act.
The court ruled that the Supreme Court finds all the questions of law are liable to be answered in favor of the Tata Group and those of the appeal filed by the Tata Group are liable to be allowed and Shapoorji Pallonji group is liable to be dismissed.