Companies

Mistry may contest ouster from Tata Global

Our Bureau Mumbai | Updated on January 27, 2018 Published on November 16, 2016

What lies within? Bombay House, headquarters of the Tata Group

Cyrus’ office questions Tata Sons conception of the role of independent directors



The boardroom battle between Cyrus Mistry and Tata Sons is set to shift to the courtroom, with the former terming as ‘illegal’ his removal from the Chairmanship of Tata Global Beverages.

On Tuesday, Tata Global Beverages (TGB) had said that seven out of the company’s 10 directors had voted in favour of Mistry’s removal.

Mistry’s office, however, termed the ouster “illegal”, saying there had been no voting and that a proposal to introduce a resolution to replace the Chairman was disallowed.

“This is illegal and we are mulling our options, including taking legal action. We have so far not initiated any legal proceedings, but may do so if Tata Sons continue to violate rules,” said a source close to Mistry.

Nothing illegal: Bhat

Tata Global’s newly-appointed Chairman, Harish Bhat, however, said the decision to remove Mistry was legal and taken because the incumbent had lost the confidence of the primary promoter group.

“There are significant risks from having a chairman who is in a hostile relationship with the primary promoter company. Those risks can come from the use of the Tata trademark. Those risks can come from attraction and retention of talent, people who have joined the company as part of the Tata Group,” Bhat said in an interview with a television channel.

Sources close to Mistry also termed as “shocking” the cancellation of orientation sessions for new directors.

After the three new directors (Ajay Piramal, Amit Chandra, and Venu Srinivasan) were inducted in August, Mistry had planned two six-hour sessions, which were scheduled for November 2 and 15.

“Since the $100-billion Tata Group, with over 100 companies and 6,50,000 employees, is a massive enterprise with a 148-year history, Cyrus believed that for the new directors to be effective in making appropriate and informed board decisions, they needed a deep understanding of ... the group. It is shocking that even before understanding the group, what had been achieved over the 148 years — and more granularly over the chairmanship of Cyrus Mistry — these newly-inducted board members concluded that Mistry should be replaced,” said a source close to Mistry.

‘Understanding the group key’

“The cancellation of the new-director orientation programme demonstrates that Tata Sons Limited believes knowledge of the group is not a pre-requisite to being a board member and making decisions fundamental to the lives of so many employees and stakeholders,” the source added.

Mistry and the Tatas have been embroiled in a bitter spat since the latter ousted him from the Chairmanship of Tata Sons.

Mistry has been removed as chairman of TCS and Tata Global, while indpedent directors at Tata Chemicals and Indian Hotels have backed him. Since then the Tatas have moved to remove Mistry and Nusli Wadia as Directors of three group companies.

‘Rare move’

Proxy advisory firm Institutional Investor Advisory Services India Limited (IiAS) said that while there have been instances in the past where minority shareholders have proposed resolutions seeking removal of independent directors (recent examples being S. Kumars Nationwide and Ricoh India), a resolution being proposed by the controlling shareholder to remove an independent director is rare.

“Allowing controlling shareholders to remove independent directors from the board undermines the integrity of the entire process and the institution of independent directors itself ... diversity of opinion should be promoted and not stifled,” IiAS said.

Published on November 16, 2016

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