Cyrus’s companies want Tata Trusts’ veto right scrapped

MUMBAI: Cyrus Investments and Sterling Investments, which together own a minority stake in Tata Sons, wants the veto rights enjoyed by Tata Trusts, the majority shareholder of Tata Sons, over its board to be deleted from the Articles of Association (AoA) of the Tata Group’s holding firm. This request was put forth by Aryaman Sundaram, the counsel for Cyrus Mistry’s family firms, to the Mumbai bench of National Company Law Tribunal on Monday.

Article 121 of Tata Sons’ AoA empowers directors nominated by the Tata Trusts to reject any and every decision presented to the board of the company, which Sundaram said undermines the board of Tata Sons. “The affirmative rights in the AoA are warped and turn logic on its head.”

Sundaram argued that affirmative rights are usually given to nominee directors of minority shareholders and that too on limited matters. However, Tata Trusts with just two of their nominees can reject what the rest of the board members of Tata Sons decide. Tata Trustees demand pre-clearance of anything that may be taken to the board of Tata Sons, thereby rendering the board a redundant formality, Sundaram highlighted. The matter relates to Cyrus Investments and Sterling Investments claiming mismanagement and minority shareholder oppression at Tata Sons.

Sundaram said that Tata counsels’ endorsement of Bharti Airtel’s AoA is an excellent proposition for Cyrus Investments and Sterling Investments. In Bharti Airtel, the protective veto rights are given to the minority investor and not to the promoter family, the Mittals, he said. Sundaram said that while shareholders own the company and can vote the directors into office, it is for the board members to manage the company in the interest of all stakeholders.

Sundaram pointed out that a Madras High court judgment had ruled that inclusiveness of minority shareholder is a principle of company law even if it is without a written agreement. The court had said that decades of directorship would entitle an ousted director to be reappointed by the other shareholder group. The court had ruled that in case of oppression the test is not one of legality but of justice and equality, Sundaram said. Tata Sons ousted Cyrus Mistry from the chairman’s post in October 2016 and removed him as a director on February 6, 2017.