Recently, the Supreme Court ruled in the well-known corporate dispute case known as the Tata-Mistry dispute: Tata Consultancy Services Ltd. v. Cyrus Investment Pvt. Ltd. & Ors. One of the biggest corporate legal disputes in the nation was the Cyrus Mistry v. Tata case, which sprang from a boardroom coup in 2016 that saw Cyrus Mistry ousted as Chairman of Tata Sons.
The NCLAT order was overturned by the bench headed by Chief Justice of India S.A. Bobde, who also upheld the NCLT order in the Tatas' favour. As it deals with topics like the rights of minority shareholders, corporate governance, the conversion of a public limited company to a private limited company, etc., this decision is noteworthy in the field of corporate law. The Companies Act of 1956 and the Companies Act of 2013 both have sections that the Supreme Court has interpreted.
In the instant case titled Tata Consultancy Services Ltd. v. Cyrus Investment Pvt. Ltd. & Ors the issue raised for clarification before the Supreme Court was:
Whether the corporation has conducted its business in a way that is repressive and harmful to some of its members?
Whether the company's reasonable and equitable dissolution adheres to the accepted guidelines and standards?
With regard to the first issue, the House of Lords had defined "oppressive" as "burdensome, harsh, and wrongful" in the case of Scottish Cooperative Wholesale Society v. Meyer, which was cited by the Supreme Court. Sections 241 to 246 of the Companies Act, 2013, which deal with preventing oppression and poor management, were also cited by the Court. The Court noted that Cyrus was initially fired from his position as executive director, but that his subsequent disclosure of sensitive company information to the Income Tax Department and media leaks led to his justifiable dismissal from the directorship of the company.
With regard to the second issue, The Court noted that the just and equitable provision for winding up and grant of relief under sections 241 and 242 cannot be triggered by the mere termination of the Directorship in the Hanuman Prasad Bagri v. Bagri Cereals Pvt. Ltd. case. The Court additionally noted that it is ludicrous on the part of the claimant to claim that the Board is oppressive to the interests of minority shareholders after being named Ratan Tata's successor in 2012 while holding only 18.37 per cent of the company's stock.
The Court categorically stated that,
"There may be cases where the removal of a Director might have been carried out perfectly in accordance with law and yet may be part of a larger design to oppress or prejudice the interests of some members. It is only in such cases that the Tribunal can grant a relief under Section 242. The Company Tribunal is not a labour Court or an administrative Tribunal to focus entirely on the manner of removal of a person from Directorship. Therefore, the accolades received by CPM from the Nomination and Remuneration Committee or the Board of Directors on 29.6.2016, cannot advance his case."