The battle between Ratan Tata Vs Cyrus Mistry
As stated by Former SCBA president and Senior Advocate Dushyant Dave in a live debate that the Supreme Court has neglected matters of national importance during a pandemic and it has entirely focused its energy on the corporate battle between Tata and Mistry is letting down millions of distressed citizens looking for justice from the institution meant to deliver equitable justice, many times delivery of justice in high profile corporate cases is curious and subject of debate. How jurisprudence, facts, merits, and delivery of justice are changed in such cases is always debated. In the past few years, one such high-profile commercial dispute is Ratan Tata Vs Cyrus Mistry, where a lot of stakes, debates happened. Every decision of each judicial forum on this high-profile litigation on the control of India’s biggest firm Tata Group is always debated and invited into the limelight.
The Supreme Court’s decision in the dispute between the Tata and Cyrus Mistry led Shapoorji Pallonji Group (SP Group), reminds of Lord Justice Asquith’s quip about the judicial system in the UK. He remarked that an ideal trial court judge “should be slow, courteous and right which was not to say that the Court of Appeal must be quick, rude and wrong because the Court of Appeal would then be usurping the function of the House of Lords”.
The Supreme Court is not expected to, and indeed should not, get embroiled in the facts of a particular case or re-appreciate the evidence afresh.
The Supreme Court’s verdict in the Tata-SP Group case is now debated in many law and corporate circles and many opine that the apex court’s decision was not well-founded for a variety of reasons. Not in the least because it casts aside the well-settled law that directors owe fiduciary duties to the company and not the shareholders nominating them. The main argument is Supreme Court has entered into the domain of fact-finding of National Company Law Appellate Tribunal (NCLAT) in the matter instead of limiting it to the question of law or a mixed question of fact & law.
The Supreme Court is foremost a court of law. Its jurisdiction under Section 423 of the Companies Act, decides “questions of law” emanating from the orders of the NCLAT. It serves an important objective of shutting out appeals that do not involve questions of law from engaging the Supreme Court’s precious judicial time. These provisions empower the Court to busy itself with cases where questions of law or mixed questions of law & fact are involved and enable the Court to articulate legal principles which courts are then expected to apply to the individual facts of each case.
The Supreme Court is not expected to, and indeed should not, get embroiled in the facts of a particular case or re-appreciate the evidence afresh. But that is exactly what the apex Court has done here and without any sound legal basis. The result is that a golden opportunity to lay down legal principles that corporate India can be guided by has been missed. The Supreme Court is not expected to, and indeed should not, get embroiled in the facts of a particular case or re-appreciate the evidence afresh. But that is exactly what the Court has done here and without any sound legal basis. The constitutional bench of the Supreme Court should lay down clear guidelines on the corporate jurisprudence to bring transparency in the corporate governance wherein rights of the minority shareholders must not be encroached or overpowered by the majority shareholders in any company. It is vital for the streaming of FDI inflow in India wherein the minority rights of the shareholders are protected.
While it may be argued and rightly so that questions of fact and questions of law are sometimes mingled, it is wrong to say there is no distinction between the two. A simple example, in the context of this case, will make this distinction clear. Whether Cyrus Mistry was removed because of his lack of performance (as the Tata’s side claimed) or because he resisted interference by a super board (as the SP Group claims), is a question of fact as indeed is the question of whether the manner of his removal and the methods employed for this purpose, lacked probity. The NCLAT answered both questions in the SP Group’s favour.
The Supreme Court was required to evaluate what was the legal effect of these findings of fact of the NCLAT. Did they make out a case of oppression in law and if they did, whether the reliefs granted by the NCLAT were justified, as a matter of law? A court of law can interfere with the findings of fact only if these are either based on no evidence or were perverse i.e. the finding was so shocking that no reasonable fact would have arrived at, on the evidence before it. Ironically the Court acknowledged this to be the correct test but abandoned this principle altogether.
Supreme Court’s decision is replete with findings/ comments on the list between the parties. Each of these findings/ comments falls within the domain of pure questions of fact that are not matters the Court ought to have waded into. The Court has re-appreciated the evidence de-novo and in the process disturbed the findings of fact of the NCLAT, without even explaining why the findings of fact of the NCLAT called for interference.
Tribunals like the NCLAT exercise the jurisdiction that High Courts formerly did. Challenge to the constitutional validity of provisions that make NCLAT the final fact-finding body was repelled by a Constitution bench of five judges of the Supreme Court in a landmark case of Madras Bar Association v Union of India. In this case, the apex court found it perfectly reasonable that the NCLAT (comprising judicial members on par with the judge of a High Court) was empowered to decide all questions of fact and law whereas an appeal against its orders to the Supreme Court would lie only on questions of law.
But the apex court’s Judgment on Tata Vs SP Group has overlooked this well-settled practice. What could explain this deviation from the established principle of the judicial reticence of a court of law to the trier of fact (fact-finding by jury or judge by evidence?). A retired outspoken Supreme Court Judge Justice Markandey Katju has been critical of the working of the top court and he has suggested that part of the problem lies in the Court perhaps viewing this high profile corporate case more as a battle between its two personalities, rather than an issue involving the rights and duties of a majority and minority shareholder of a biggest corporate house in India. It may be desirable from the apex court to clarify the various doubts generated from the recently concluded TATA vs SP Group case and the matter should be referred to a larger bench to adjudicate on the jurisdiction of the Supreme Court in the admission of an appeal under section 423 of the companies Act,2013 to deliver appropriate justice in this case and to avoid delays in justice for similar corporate disputes in future.
1. Text in Blue points to additional data on the topic.
2. The views expressed here are those of the author and do not necessarily represent or reflect the views of PGurus.
 Madras Bar Association vs Union Of India on 14 July, 2021 – Indian Kanoon
- Reckless judgments can disrupt a country’s progress - September 23, 2021