Move to throw Mistry, Wadia out of Tata boards

Tata Sons on Friday took the battle to the Mistry camp by initiating proceedings to remove Nusli Wadia and Cyrus Mistry as Directors from the boards of a number of group companies, including Tata Motors, Tata Steel and Tata Chemicals.

This is being seen as a precursor to ousting Mistry from the Chairmanship of these companies.

According to sources close to Tata, action is being taken against Wadia for allegedly influencing independent directors on these companies to back Mistry. Wadia had backed Mistry at the Tata Chemicals board meeting on Thursday.

Wadia has been an independent director of Tata Motors since December 22, 1998 and Tata Chemicals since June 26, 1981. He’s also the chairman of Bombay Dyeing and Britannia Industries.

Directive to convene EGMs In statements issued by the group companies to stock exchanges, Tata Sons asked the companies to convene an Extraordinary General Meetings to pass resolutions for the removal of Mistry and Wadia as Directors of the Company under Section 169 of the Companies Act, 2013.

Tata Sons said the trust reposed in Mistry by appointing him Chairman four years ago “has been betrayed by his desire to seek to control main operating companies of the Tata group to the exclusion of Tata Sons and other Tata representatives.”

“It was fair expectation of Tata Sons that Mistry would gracefully resign from the boards of other Tata companies on being replaced from the position of the Chairman of Tata Sons. This expectation was in line with convention, past practice as well as the Tata governance Guidelines that were approved and adopted by Tata Sons under the aegis of Mr. Mistry. However, his departure from these requirements and conduct since his replacement as Chairman of Tata Sons demonstrates his absolute disregard of long standing Tata traditions, values and ethos,” Tata Sons said in a statement. Sources close to the Mistry camp, however, said it was unrealistic on the part of Tatas to expect him to quit now after being ousted from the Chairmanship of Tata Sons “without any reason”. The sources said the fact that the Tatas subsequently ousted him from TCS without even a board resolution indicates that matters have gone beyond traditions and values of the Tata group.

A divided group The boardroom battle between the two sides has split the group. Executives who back Mistry’s stand are being eased out, while old Tata group loyalists are attempting to take control.

Industry experts said Mistry cannot be removed as Chairman of any of the listed companies of Tata Group unless the Articles of Association of that company bestow that right on Tata Sons. The total equity holding by Tata Sons in the group company will also determine whether Mistry remains on the board of these entities.

“Of the seven listed Tata companies where Mistry is a Director, TCS has the highest promoter holding at 73.33 per cent. The other six companies have a promoter holding of between 30 and 39 per cent. It is to be seen as to what happens with all the other companies where Tata Sons has a holding below 40 per cent. In these companies, the vote of institutional investors will be decisive,” said Proxy advisory firm InGovern Research Services.

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