Cyrus Mistry was sacked by violating Tata Sons, TCS provisions of Companies Act: RTI
Citing the NCLT order of August, which dismissed Mistry's petition challenging his removal, Tata Sons said all the requisite processes under the Companies Act were followed in removing Mistry as the group chairman and also from the board of group crown jewel Tata Consultancy Services (TCS).
The dramatic sacking of Cyrus Mistry as chairman and director of Tata Sons and TCS violated provisions of Companies Act, RBI rules and more importantly, Tatas' own articles of association, RoC, Mumbai said in an RTI reply, a charge that the Tatas have vehemently denied. Citing the NCLT order of August, which dismissed Mistry's petition challenging his removal, Tata Sons said all the requisite processes under the Companies Act were followed in removing Mistry as the group chairman and also from the board of group crown jewel Tata Consultancy Services (TCS). "The respective board of directors acted as per the provision of the Companies Act as well as in compliance of the articles of association of the company. This was subsequently approved by both the shareholders of Tata Sons and TCS the NCLT has also confirmed that the process followed for removal of Mistry was valid and accordance with law," a Tata Sons spokesman told PTI.
The statement further said, "All requisite processes were followed in line with the Companies Act in case of Mistry's removal from the board of TCS as also as the chairman of TCS and Tata Sons." The denial by the Tatas comes after PTI reported earlier in the day quoting an RTI (right to information) reply from Uday Khomane, the assistant registrar of companies (RoC), Mumbai to the Shapoorji Pallonji Mistry Group. The Tatas also denied a reference in the RTI reply that said repeated reminders from the RoC did not elicit the desired response from the Tatas in getting all the documentary evidence for their action of sacking Mistry. "Neither TCS nor Tata Sons had received any communication from the RoC, Mumbai, regarding any non-compliance of their demand in this regard," the statement from Tatas said.
The Shapoorji Pallonji Mistry Group, which owns 18.4 per cent in Tata Sons, had filed an RTI query with the Mumbai RoC on August 31, and the reply was given on October 3, 2018. The RTI reply said the way Mistry was removed from the chairmanship of Tats Sons and also as the director of TCS, violated the relevant legal provisions under the Companies Act, 2013; the Reserve Bank rules governing NBFCs; and more importantly the rule 118 of the articles of association (AoA) of Tata Sons, the parent of the diversified Tata group, which is registered as an NBFC with the monetary authority. PTI has seen a copy of the RTI reply from RoC which is based on the assessment of the documents furnished by the Tatas in the aftermath of the boardroom coup on October 24, 2016, dismissing Mistry as the group chairman.
The report offers an internal view of the RoC, which interestingly is totally opposite of the view taken by the National Company Law Tribunal (NCLT), Mumbai in August, when it dismissed the Mistry petition challenging his dismissal. In a boardroom coup, Mistry was sacked as the chairman of Tata Sons on October 24, 2016, two months short of four years in the company, after being nudged to take over the reins of the USD 103-billion group as the second non-Tata chairman, after Nowroji Saklatwala(1934-38), in December 2012, after Ratan Tata retired. Mistry was removed as TCS director with 93.11 per cent votes at the EGM held on December 13, 2016, as per its company secretaries Parikh & Associates, which cited section 169(2) of the Companies Act 2013 read with section 115 and 100 (2)(a) for his removal.
But TCS did not send out the complete representation of Mistry to all shareholders, which violates section 169 (4)(b) of the Companies Act, noted the RoC reply. The RTI reply is based on the queries posed by SP Kumar, western regional director, RoC, Mumbai which has found that Tata Sons violated rule 118 of its articles of its AoA, when it removed Mistry. The RTI reply, exclusively available with PTI, states that "article 118 of the AoA of Tata Sons prescribes that its chairman can be removed in the same process as specified for his appointment i.e. by the selection committee consisting of four persons and based on such recommendation of the removal committee only the board is empowered to remove its chairman". It goes on to add that Tata Sons "being an NBFC duly registered with RBI, any management change requires prior approval of the RBI", which was also not complied with. The reply also cited several irregularities pertaining to December 13, 2016, EGM convened by TCS to remove Mistry as a director from its board. TCS had adopted a letter written by the company secretary and chief operating officer of Tata Sons on November 9, 2016, as a special resolution notice to sack Mistry.
The reply noted that this letter from Tata Sons was sent to TCS without any proof of a board resolution authorising the issuance of such a letter. The reply also states that "it appears prima facie that there was no proper 'special notice' received" by TCS. The RoC also said that the TCS' company secretary thereafter "on his own" forwarded the purported special notice from Tata Sons dated November 9, 2016, to Mistry.
"The letter dated November 11, 2016, written by the VP & CS of TCS is against the provisions of section 169(3) of the Companies Act of 2013 as the power to send such a letter is vested with the board of the company," noted the RoC report. The RoC further noted that "since there was no TCS board meeting between November 9 and 11, 2016, and in the absence of any board resolution authorising the actions of the TCS' company secretary, such a letter and the resulting actions would be void ab-initio". Additionally, TCS had also failed to send out the complete shareholder representation of Mistry to all shareholders, "in violation of section 169(4)(b) of the Companies Act", and hence "the consequential resolution of EGM dated December 13, 2016 for the removal of Mistry would also be void". The RoC, Mumbai in a letter dated January 25, 2017, had written to the regional director of the corporate affairs ministry highlighting these concerns.
"As the verification of the relevant documents further finds that the company has violated the provisions of the Companies Act, and rules thereunder, I am referring the matter to the regional director to verify the findings in terms of rule 11 (2) of the Companies (registration offices and fees) rules of 2014," the letter read.
The RTI reply quotes SP Kumar, RoC Mumbai who in a February 17, 2017 letter had said that "RoC having come to the conclusion that transactions are void [Annexure C point (1) to (4)] has to express in unequivocal words whether the e-form is to be rejected or e-form or document as the case may be, as invalid in the electronic record in terms of rule 10(4) of Companies (Registration Offices and Fees) Rules, 2014." However, it is unclear what further action the ministry took on these observations, it noted. Mistry has challenged the NCLT Mumbai order that dismissed his petition, in the NCLAT, New Delhi, which will begin hearing the case from December.
(With inputs from agencies.)