Cyrus Mistry saga: The story of minority shareholders' protection

After a prolonged hearing in the NCLAT, Justice Mukhopadhaya upheld the Mistry camp's appeal and ruled N Chandrasekaran's appointment as illegal. The NCLAT has also given a window of four weeks to Tata Sons to reinstate Cyrus Mistry as the chairman of Tata Sons.

The NCLAT also felt that the behaviour of Tata Sons' board towards the minority shareholders was “prejudicial” and “oppressive”. The Judgement criticized the NCLT that the tribunal in its opening paragraphs was not required to highlight the products of Tata Sons nor was required to appreciate its activities before deciding the case on merit.

The NCLAT ruled that in view of "Prejudicial" and "Oppressive" decision taken during last few years, the company and its board of directors and shareholders which has not exercised its power under Article 75 since inception, will not exercise its power under Article 75 against Appellants and other minority member. Such power can be exercised only in exceptional circumstances and in the interest of the company, but before exercising such power, reasons should be recorded in writing and intimated to the concerned shareholders whose right will be affected. The decision of the Registrar of Companies changing the company from Public Company to Private Company is declared illegal and set aside.

Tata Sons has four weeks to appeal against the NCLAT's order in the apex court of India. If appealed in the SC, it will be an interesting battle to see how the top court deals with the order. The legal brains will now work overtime to take it before the apex court. The Mistry camp should file a caveat to set the ball rolling in the apex court.

The NCLAT's decision is a shot in the arm for all the minority shareholders in the board room. This will also act as a wake-up call for the majority shareholders and cannot take the minority shareholders in their sway for decisions. The Companies Act 2013 has adequate protection for the minority shareholders. The Minority shareholders can file an Application to Tribunal for relief in case of oppression (Section 241).