Bid Tata to this duel

Mohan R Lavi | Updated on January 27, 2018


An arbitrator should settle the ugly spat

Possibly, Tata Sons believed that the aftermath of the instant sacking of Cyrus Mistry would pass off without much sweat. The reality is proving to be very different. Charges and counter-charges are flying all over the place. Skeletons in boardrooms of the Tata group are coming out into the open.

Mistry fired the first salvo after his firing to which Tata Sons responded. In the interim, some independent directors supported him while others ousted him from group companies. If reports are to be believed, Mistry is planning to go to the courts claiming that his removal is illegal. If so, this is going to be one long protracted battle. However, from what we know, there is a very specific and powerful clause in the Articles of Association on removal of directors that could go against Mistry in the Bombay High Court.

Independent directors

Some have also questioned the logic of how a few independent directors could support Mistry in a few companies while others didn’t in the rest.

This argument may not be relevant because managing an eclectic set of companies in the Group required diverse skillsets which a single person cannot possibly possess.

Also, being a state of mind, independence is very difficult to prove to anyone.

Proper documentation of facts and actions could prove to be a saviour to a director who wants to prove that he acted independently in a given situation. The Companies Act, 2013 has a detailed Code of Conduct for independent directors and the penalty for violation is probably as strict as the Indian Penal Code. This should however, not instil a sense of fear as implementation of the provisions has been lackadaisical.

Arrange arbitrators

Unfortunately, all sides seem to reacting to the episode instead of attempting to resolve it. The fracas may distract Tata Sons from selecting its new Chairman. The proposed candidate may not want to occupy the corner office with an opening baggage of problems and legal battles.

Amid all the back and forth of words and letters, the problem seems to be pretty simple— two persons at the top of the group could not get along, their views on many things being diametrically opposite.

It is time for both to look out for an arbitrator who can sit across the table and come out with an amicable settlement. The arbitrator should be an independent person who has no involvement with the group.

Both the parties and their associates should be stopped from making any public statements during the arbitration process. There is no dearth of reputed public personae in Mumbai who could be the arbitrators.

It will take time but prevent the warring individuals from making news for all the wrong reasons.

The writer is a chartered accountant

Published on November 17, 2016

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