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Tata Sons has begun the process of removing Cyrus Mistry as the Chairman of its group entities.
On Thursday, Tata Consultancy Services (TCS) said Tata Sons has appointed Ishaat Hussain as Chairman of the company. Tata Sons also issued a special notice to convene an extraordinary general meeting to consider removing Mistry as Director.
“The company has received a letter.. from Tata Sons Limited nominating Mr Ishaat Hussain as the Chairman... in place of Mr Cyrus P Mistry with immediate effect,” TCS said in a statement to the stock exchanges.
Tata Sons holds nearly 73 per cent in TCS, and has used its majority shareholding to push Mistry out. Sources close to Mistry termed the action as “cloak and dagger machinations with little regard to due process of law. TCS sent a notice to all stock exchanges stating that Cyrus Mistry stands replaced as Chairman... without even a board resolution being passed.”
“TCS has quoted Article 90 of its Articles of Association. Article 90 only enables Tata Sons to nominate a Chairman. The Board has to appoint the person so nominated. Tata Sons had asked TCS yesterday (November 9) that it would like Mistry replaced by Hussain: it made a nomination,” the source said, adding that TCS was to convene a board meeting and table the nomination or move a circular resolution. Nothing like that was done, the source said.
JN Gupta, Managing Director at Stakeholders Empowerment Services, said the Tatas’ action raised questions of governance. “If Mistry was appointed by the board, he cannot be dismissed without its approval. It is a debate between law and good governance practice.”
The TCS board comprises Ishaat Hussain, Chairman; Cyrus Mistry, Director; N Chandrasekaran, CEO and MD; and Aarthi Subramanian, Global Head of Delivery, Excellence Group. Aman Mehta, Venkatraman Thyagarajan, Clayton M Christensen, Ron Sommer, Vijay Kelkar and OP Bhatt are the independent directors.
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