Cyrus Mistry Restored As Tata Sons Chairman By Appeals Court: Massive Setback For Ratan Tata?
In the month of October in 2016, corporate India was stunned to witness an unprecedented incident at Tata Sons, whose corporate governance is considered to be an ideal.
Cyrus Mistry, then Chairman of Tata Sons, was unceremoniously removed from his post, as questions were raised against his management style, and his open disagreement with Ratan Tata, the chairman emeritus of Tata Sons.
However, now, in a twist of events, Cyrus Mistry has been restored as Tata Sons Chairman, as per a ruling by an appeals court.
The two-judge panel of India’s National Company Law Appellate Tribunal has termed Cyrus Mistry’s removal as illegal, and the appointment of N Chandrasekaran as the new Chairman illegal too.
Huge Setback For Ratan Tata
This ruling by the appeals court is a huge setback for Ratan Tata, who had himself led the charges against Cyrus Mistry, and had ordered his removal from the post of Chairman of Tata Sons.
Besides, this can also be considered as a massive failure for corporate governance of $110 billion Tata Sons, which is a 151-year-old holding company of Tata Group, which makes everything from salt to software.
In their judgment, the appeals court has described Cyrus’ removal as ‘prejudicial’ behavior, and done in haste.
The decision to convert Tata Sons from a public company to private company has also been reversed.
The appeals court has given a window of 4 weeks for Tata Sons to reinstate Cyrus Mistry as the Chairman of the Tata Group, and this also means that Tata Sons now have 4 weeks to make a counter appeal against this decision.
Corporate Governance Of Tata Sons Under Scrutiny
As per Dharmesh Kant, Mumbai-based head of retail research at Indianivesh Securities Ltd, this judgment by the appeals court will have some serious after effects.
To start with, investors with Tata Group can now hold their investments, till the air is cleared about the future of Chairman post.
He said, “While this is bound to be contested in the highest court, the legal battle will be negative for investors in the near term,”
Sameer Kalra, Mumbai-based strategist at Target Investing said that now all decisions made by the existing Chairman: N Chandrasekaran will be put on hold, thereby further creating chaos.
Share prices of companies under Tata Sons have witnessed a downfall, since the verdict came out.
We will keep you updated, as more details come in.