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NCLT, Mumbai Bench dismissed the petition filed by Cyrus Mistry who incidentally owns about 18.3% (including preference capital) of Tata Sons Limited.

NCLT ruled that Tata Sons Limited has all the rights to remove its Executive Chairman and NCLT found no merit in Mistry’s  allegations of operational mismanagement and oppression of minority shareholders.

The Mistry-Tatas dispute raises few important questions :

1. Do existing corporate governance regulations pursuant to Chapter XVI of Companies Act 2016-Prevention of oppression and mismanagement – protect the interests of minority shareholders per se?

2. Does the Boards of Companies have unbridled powers to sack the Executive Chairman?

3. In doing so, was there corporate democracy and is the Board all powerful to oust the executive chairman without a fair chance to defend?

4. Of course the Board is competent enough to remove the executive chairman but what is the basis of measuring the competency?

5. Is the executive chairman a mere employee of the company and the Board has got all powers to remove him and the remedy for him lies in other legal /civil forum and does not this amount to oppression and mismanagement?

6.Is the manner in which the Executive Chairman was sacked tantamount to miscarriage of justice though this matter is likely to end up with the highest judicial forum i.e. Supreme Court Of India.

7. If the same procedure is to be emulated by all the Boards of companies, where the Board is considered to be all pervasive and the buck stops with the Board, then the provisions of section 241 & 242 of the Companies Act, 2013 is redundant and need not be in the statute.

8. Does not this decision take away the rights of the minority shareholders though the Executive Chairman may not have been appointed on proportional representation and he was appointed by the Board?

9. The larger issue here is that the matter is not between two individuals but essentially an issue of the rights of the minority shareholders and a CEO who was summarily sacked.

10. The Companies Act, 2013 requires that a petitioner should hold at least 10% of the issued capital of the company or represent 10% of the total number of members to be eligible to file cases alleging mismanagement and oppression of minority shareholders and in this case the petitioner is holding less than 3% if preferential shares are excluded and NCLAT has waived the minimum ownership norms and hence the definition of minimum shareholding has been given a go by and whether this can be taken as a precedent ?

(Caveat:  This is only for the purpose of academic discussion and the author does not hold any brief for either of the parties to the dispute)

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