MUMBAI -- India's Supreme Court ruled in favor of the country's leading conglomerate Tata Group on Friday by upholding the 2016 removal of Cyrus Mistry as executive chairman.
The ruling ends a four-year battle between the group and its former chairman. The country's top court overturned an appellate decision that deemed it "illegal" for Tata Group to dismiss Mistry and appoint Natarajan Chandrasekaran as chairman.
The legal victory for the company eliminates the risk that Chandrasekaran will be forced to step down as chairman by a judicial decision, thus sparing the salt-to-software group from associated management turmoil.
"I appreciate and am grateful for the judgment passed by the honorable Supreme Court today," Chairman Emeritus Ratan Tata, who was Mistry's predecessor as group chairman, wrote Friday on Twitter. "[T]he judgment upholding all the appeals of Tata Sons is a validation of the values and ethics that have always been the guiding principles of the group."
Ratan Tata's younger half-brother is married to Mistry's elder sister.
Tata Group, with Tata Sons as its holding company, booked revenue of $106 billion for the fiscal year ended March 2020. Group businesses include Indian tech outsourcing company Tata Consultancy Services as well as Tata Motors and Tata Steel.
Shares in Tata Group's major listed units jumped during trading Friday. Tata Motors closed nearly 4% higher, while Tata Steel added 6% and Tata Chemicals rose almost 2%.
Mistry fought his October 2016 dismissal by filing a complaint against Tata with the National Company Law Tribunal, a quasi-judicial body. After the NCLT dismissed the complaint in 2018, Mistry lodged a suit at the National Company Law Appellate Tribunal.
The appellate tribunal sided with Mistry in December 2019 by declaring illegal the appointment of Chandrasekaran as the replacement chairman. The tribunal ordered Tata to restore Mistry to his former position. Tata appealed the ruling to the Supreme Court in January 2020.
When Tata Sons announced the replacement of Mistry as chairman in 2016, it gave no reason for the abrupt decision other than saying it was in the long-term interest of the group.
In a November 2016 statement, Tata Sons accused Mistry of weakening the unity of the group. Some observers said that Mistry had failed to grow the group, while others speculated he did not get along with Ratan Tata.
Mistry last year proposed that Tata buy back the shares of Tata Sons held by Shapoorji Pallonji Group, which he controls, at a price of $24 billion in order to end the dispute. Tata objected that the price was too high, and the two sides never came to an agreement.
The Supreme Court left the share valuation issue open, saying "at this stage in this court, we cannot adjudicate on the fair compensation." The fate of Shapoorji Pallonji Group's stake in Tata Sons remains uncertain.