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Tata Sons on Monday sacked its executive chairman Cyrus Mistry and handed over interim charge to Ratan Tata. Most business leaders, lawyers and analysts BloombergQuint spoke with declined to comment on this development but described it as shocking.
What won’t be shocking is if the Shapoorji Pallonji group decides to contest this decision by the Tata Sons board.
The Pallonji group owns 18.38 percent in Tata Sons, while Tata Trusts and Tata group companies own the rest, as per the company’s 2014-15 annual report.
Also read: From Ratan Tata To Cyrus Mistry And Back
As a significant shareholder in Tata Sons, does the Shapoorji Pallonji Group have a shareholder agreement of any sort with the company? No such agreement is available in the public domain, but if it exists and it lays down the manner in which decisions will be taken, or people will be appointed, then the breach of those provisions may give the Shapoorji Pallonji Group grounds a challenge, said Kartik Ganapathy, a partner at legal firm IndusLaw in an email interview to BloombergQuint.
The Sahpoorji Pallonji group’s 18 percent ownership, Kartik explained, is significant only because it could enable a claim of oppression or mismanagement under company law. The claim could be that the "company’s affairs have been or are being conducted in a manner prejudicial or oppressive to any member or members or prejudicial to public interest or in a manner prejudicial to the interests of the company”, he added.
The other battle may be started by Cyrus Mistry himself, said JN Gupta, founder of proxy advisory firm SES in a telephonic interview. The terms of Cyrus Mistry’s appointment as chairman will become crucial.
Prem Rajani, managing partner at law firm Rajani Associates added that if Cyrus Mistry has been removed as a chairman but continues to be a director on the board of the company, there is no provision in the Companies Act, 2013 that gives him the right to challenge this decision, unless the Articles allow otherwise.
Cyrus Mistry is also the chairman on board of group companies like Tata Steel, Tata Motors, Tata Chemicals. These boards, said JN Gupta, will have to independently decide and to remove Cyrus Mistry and get their shareholders to approve the decision.
(For more stories, check BloombergQuint)
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