The Supreme Court on Tuesday drew a parallel between politics and corporate governance when minority shareholder Shapoorji Pallonji complained of undue interference from Tata trustees within the operating of Tata Sons, giving the board hardly any independence.
A Bench led by Chief Justice of India Sharad A. Bobde stated the scenario was akin to a Chief Minister opting to seek the advice of his celebration colleagues earlier than a Cabinet assembly. Senior advocate C.A. Sundaram, for Shapoorji Pallonji Group, alleged interference by the stakeholder trustee-directors within the operating of Tata Sons.
“Let us take the case of a Chief Minister who before the Cabinet meeting consults some party colleagues on what to do and what not to do. Will you say he has lost his independence?” Justice Bobde requested.
Mr. Sundaram stated politics was completely different from corporate governance.
“In the commercial world, money is equivalent to power. Money is a kind of power. If in order to preserve money in a company, somebody seeks assistance from someone outside respected by him or a former chairman, does it amount to loss of independence of board,” the Bench requested once more.
“Yes, it does. In fact, in politics, majoritarianism accounts for everything. This is not the case under the Companies Act,” Mr. Sundaram responded.
On the difficulty of interference and pre-consultation with the trustee administrators in operating the affairs of Tata Sons, the senior lawyer stated, the “role of shareholders cannot be to run the affairs of the company. They can only work for the welfare of the company.”
On the explanation behind the feud between Cyrus Mistry and Tata Sons, Mr. Sundaram contended that issues had come to a head as a result of Mr. Mistry had been set to desk a corporate governance doc, which proposed to manage the Tata Trusts’ say in Tata Sons in order that the nominee administrators didn’t determine all the pieces for the group’s firms.