Former Chairman, Cyrus Mistry Moves in Appeal Before the NCLAT Seeking Amendment of the AOA of Tata Sons

Former Chairman, Cyrus Mistry Moves in Appeal Before the NCLAT Seeking Amendment of the AOA of Tata Sons

New Delhi: On Wednesday, December 12, the National Company Law Appellant Tribunal (NCLAT) was urged to direct Tata Sons to amend certain provisions of the company's Article of Association.

The request was initiated by former Tata Sons Chairman Cyrus Mistry, who is seeking amendment of Article 121 in its AOA as the Article under appeal undermines the authority and role of board of directors which is regulated by the Companies Act.

On August 3, Mistry moved in appeal before the NCLAT challenging the July 9 order of the Mumbai bench of NCLT, where the Tribunal had dismissed Mitry's plea against his removal as Chairman of the firm in October 2016.

CA Sundaram, Senior Advocate appearing for Cyrus Mistry said, Article 121 of the AOA, the Tata Sons Trustee Nominee directors are bestowed with a veto on every decision to be taken by the board of Tata Sons. However, in fact, the provision was introduced with the intention of conventional affirmative rights being available to the minority on certain crucial decisions. Furthermore, the Article is objectionable in terms of the Companies Act under the provisions of which, the board of certain large unlisted public companies are required to comprise independent directors who are duty bound to safeguard the interests of minority shareholders.

He further submitted that, under the provisions of Article 121 of the Articles of Association of the company, the power to deliberate and conclude any decision has been vested with two nominee directors, instead of the board of directors. Thus, in order to avoid the power of the board from being sabotaged, Mistry pleads intervention by the Tribunal.

The Article under review was introduced to the Articles of the company in 2000 with the primary objective of safeguarding the interests of majority shareholders group at on certain to integral issues. However, with time, the provision was perceived in complete favor of the Tata Sons as they began to make use of the Article in their favor. Article 121 was being used as a mean to require prior consent and affirmation even on matters wherein the board could conveniently deliberate without intervention. Moreover, although the Article was introduced merely to be applied to decisions by the Tata Sons, the nominee directors were seen making use of the provision even for matters pertaining to the Tata Group of companies.

Appearing for Mistry, Senior Advocate CA Sundaram, stated that it was essential that the Article is amended as it provides undue rights to the Trustee Nominee directors on all matters, thereby subverting the authority of the  Board of Tata Sons.

Article of Association
Company Law
Cyrus Mistry
National Company Law Appellant Tribunal (NCLAT)
Tata Sons

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