Cyrus Mistry most certainly must be having the last laugh, feeling thoroughly vindicated.
Mistry did not fight to win back his positions; he fought against the unceremonious manner in which the Tata group fired him, like some low level employee.
But the National Company Law Appellate Tribunal (NCLAT) gave Mistry more than what he asked for – it declared his sacking as “illegal” and also called the appointment of N.Chandrasekaran as illegal. The NCLAT asked the Tata group to reinstate Mistry as the executive chairman and director in Tata Sons and three other companies. This reinstatement as chairman has been given a pause for four weeks to give Tata’s the time to file an appeal in the Supreme Court. But he becomes a director with immediate effect at TCS, Tata Industries and Tata Teleservices.
It seems unlikely that Mistry will return to Bombay House and lead the group – he never fought for that and that too after the unceremonious exit, no one will want to return. His coming back will not only be an unpleasant experience but will also be extremely disruptive for the business. That’s the last thing he would do as he himself in his letter, post the NCLAT order talked about all stakeholders working together for the sustainable growth and development of the Tata Group.
The NCLAT has termed the way in which Mistry was ousted as “illegal” and accepted Mistry’s argument that Tata Sons as well as its directors and shareholders acted in a prejudicial and oppressive manner towards minority shareholders, which is mainly the Shapoorji Pallonji Group.
The Tata’s had said that Mistry was removed for his non-performance but the NCLAT says that this reason holds no merit as just months before the ouster, there was nothing in records that neither the Board or any of the Trusts, at any time had expressed unhappiness over the performance of Cyrus Mistry. In fact what really makes this argument very strong is that the 3 directors who voted for Mistry’s removal joined the board only after the Nomination and Remuneration Committee (NRC) committee gave him a good appraisal. And of these three, two directors who voted for his removal, just four months’ prior to his removal on 28th June, 2016 praised the performance of Mistry.
The NCLAT said that even before decision of ‘Tata Trusts’, Mr. Ratan N. Tata, in presence of Mr. Nitin Nohria, called Mr. Cyrus Pallonji Mistry and asked him to resign.
The NCLAT said that the record suggests that the removal of Mr. Cyrus Pallonji Mistry had nothing to do with any lack of performance. On the other hand, the material on record shows that the Company under the leadership of Mr. Mistry performed well.
NCLAT said that even if there was a fall in the performance, how can the blame be laid fair and square on Mistry alone? How can the Board be absolved of its responsibility, when the nominee Directors of the Tata Trusts have affirmative vote to reverse the majority decision.
Record show that the ‘Tata Trusts’ were required to be informed of all the matters, in advance, on the ground that it can take advance decision to counter any action which may jeopardise their dividend flow.
It is very difficult to take a side and say who is right and who is wrong. Between Mistry and Tata, it was more a clash of generation, where Tata could not accept the hard hitting decisions of Mistry; he probably feared that Mistry was diluting the values which Tata group had created. Thus Tata used the ‘pretext’ of performance and fired Mistry; Tata just wanted him out and he used his clout – something which we accept as a fact of life and do not ever think of questioning. It’s his company so he has the last call – isn’t that what we all thought?
But what was downright wrong was the way in which Mistry was asked to go. You are not happy with the performance, remove the person with some dignity; you cannot sack someone as high up in the rank as Mistry like the way you sack scores of employees at TCS. And this mistreatment is what led to this ugly fight.
It’s not what you give but the way you treat a person which remains with him/her forever. And that is the bone of contention here – Mistry, personally and professionally was hurt badly and he hit back to win more than what he had anticipated.
What happens now? The legal battle will continue and Chandrasekaran will continue to lead. Its unlikely Mistry will return. But this victory of Mistry surely should teach a lesson or two to the high and mighty that they need to respect every individual and treat him/her with dignity deserved.