TATA's Cor­po­rate Feud gets Murkier

Libertatem Magazine - - Front Page - By Vaib­hav Sharma

The Bat­tle for the con­trol of the TATA Group of Com­pa­nies just got murkier with the tus­sle be­tween the stal­wart Ratan Tata and evicted Chair­man Cyrus Mistry hav­ing en­tered the third month. The pre­ced­ing events saw the di­vi­sion be­tween the com­pa­nies in favour of and op­pos­ing Mistry’s can­di­da­ture be­come wider. While most of the en­ter­prises in the Group like Tata Steel have backed the ouster of Mistry; oth­ers like In­dian Hotel Com­pany and Tata Chem­i­cals have backed his be­ing at the helm of af­fairs. The quin­tes­sen­tial as­pect of the cor­po­rate scuf­fle will be the de­ci­sion taken at the Ex­tra­or­di­nary Gen­eral Meet­ings (EGMS) sched­uled in

the month of De­cem­ber. It is set to ad­versely im­pact the TATA Sons’ im­age as be­ing In­dia’s most trusted con­glom­er­ate.

ALLEGATIONSCORPORATE GOVERNANCEOF

The for­mer Chair­man of the Tata Sons sent an email to the board of the com­pany and al­leged fraud­u­lent trans­ac­tions on the part of the pre­vi­ous Chair­man Ratan Tata. He ac­cused Tata of un­eth­i­cal prac­tices and con­flict of in­ter­est dur­ing his stint as the Chair­man. In pur­suance of the se­ri­ous al­le­ga­tions of flout­ing of the Cor­po­rate Gover­nance norms, Se­cu­ri­ties and Ex­change Board of In­dia (SEBI) asked the stock mar­kets to write to the Tata Group of Com­pa­nies and pe­ruse the trans­ac­tions for want of non­com­pli­ance with the list­ing reg­u­la­tions of the Board. It di­rected the au­dit panel of the Tata Sons to con­duct an im­par­tial probe in this mat­ter on 1st De­cem­ber. It is per­ti­nent to note that se­ri­ous claims made by Mistry as re­gards the in­volve­ment of Cor­po­rate Gover­nance departures have ad­versely af­fected the largely an­gelic im­age of the Tata Sons, hith­erto un­heard of be­ing as­so­ci­ated with such ig­no­ble cor­po­rate mis­fea­sance.

TATA SONS AC­CUSED MISTRY OF WEAK­EN­ING GROUP STRUC­TURE

The feud took an ugly turn when both the groups (Tata Sons Man­age­ment and Cyrus Mistry) were en­gaged in an un­cer­e­mo­ni­ous war of words. On 11th De­cem­ber, the Tata Sons con­tended that Cyrus Mistry had weak­ened the man­age­ment struc­ture of the firm. It also ac­cused Mistry of mis­lead­ing the selection com­mit­tee which was setup for choos­ing the Chair­man in the year 2011. He was also charged with re­tract­ing on his prom­ise of dis­tanc­ing him­self from the Shap­porji Group of Com­pa­nies, thereby raising the doubts of con­flict of in­ter­ests. Mistry is also blamed for con­cen­trat­ing all power in his hands by sys­tem­at­i­cally try­ing to re­duce the rep­re­sen­ta­tion of the Tata Sons in the ex­ec­u­tive boards of the Tata Group of Com­pa­nies. It pointed out that Mistry had in 2015 changed the Gover­nance Guide­lines Frame­work of the Group. As per the amended Guide­lines, an em­ployee must, upon his res­ig­na­tion from the Tata Sons quit from the nonex­ec­u­tive mem­ber­ship of other Tata firms as well. It thus, con­tended that in pur­suance of the above norm

Mistry must him­self quit from the post of Di­rec­tor of the Tata firm vol­un­tar­ily. In an un­preceded in­stance of mud­sling­ing, Mistry re­tal­i­ated by say­ing the con­duct of Ratan Tata had led to the ero­sion of the core val­ues of the Tata Group. While ac­cus­ing Ratan Tata’s ac­tions of ma­lign­ing Tata Sons’ rep­u­ta­tion, he said that the al­le­ga­tions against him of power con­cen­tra­tion were base­less. He even con­tested that the man­age­ment of Tata Sons had not been able to fur­nish any rea­son­able cause for his ouster even af­ter seven weeks from the 24th Oc­to­ber de­ci­sion.

MISTRY RE­MOVED FROM TCS’S BOARD

The streak of the re­moval of Cyrus Mistry from the Board of Di­rec­tors of the Tata firms con­tin­ued with him

be­ing un­seated from his post of Di­rec­tor of Tata In­dus­tries on 12th De­cem­ber. It is im­por­tant to note that prior to him be­ing shown the door at Tata In­dus­tries, he was also the chair­man of the com­pany. He also ceases to be the chair­man as the ma­jor­ity at the Ex­tra­or­di­nary Gen­eral Meet­ing favoured his re­moval. It was fol­lowed by Mistry be­ing evicted from Di­rec­tor­ship of Tata Con­sul­tancy Ser­vices (TCS). The ex­pul­sion of Mistry from the Board of TCS was an easy ma­noeu­vre for the Tata man­age­ment as the Tata Sons owns a whop­ping 73.26% stake in the com­pany. It also se­cured a ma­jor fil­lip for the Tata man­age­ment as the ques­tion of TCS Di­rec­tor­ship was vi­tal for strength­en­ing Mistry’s claim of his re­moval from Tata Sons’ Chair­man­ship be­ing un­just.

WA­DIA FILED DEFAMA­TION SUIT AGAINST TATA SONS

The cor­po­rate bat­tle got even more com­plex when Nusli Wa­dia, the Chair­man of the Wa­dia Group filed a Rs.3,000 crores defama­tion suit against the Tata Sons. Wa­dia has been one of the few sup­port­ers of Cyrus Mistry who had come at log­ger­heads with the man­age­ment of Tata Sons since the re­moval of Mistry. Mr. Wa­dia filed the said suit due the no­tice is­sued by the Tatas to re­move him from the Di­rec­tor­ship of the Tata Group com­pa­nies. Wa­dia who was been on the Board of Tata Steel, Tata Mo­tors and Tata Chem­i­cals till 24th De­cem­ber took the no­tices to be dam­ag­ing his rep­u­ta­tion. He also stated that the al­le­ga­tions levied against him by the Tata Sons were un­sub­stan­tial, false, mo­ti­vated and defam­a­tory in na­ture. He said that, he be­ing an in­de­pen­dent di­rec­tor, had the right to raise the ques­tions against the man­age­ment be­cause the com­pa­nies have been record­ing sub­stan­tial losses. In the course of a fort­night, Wa­dia was re­moved first from the Boards of Tata Steel and Tata Mo­tors, which was suc­ceeded by his de­par­ture from be­ing a Di­rec­tor of Tata Chem­i­cals on 24th De­cem­ber. The ousted Di­rec­tor is ex­pected to take le­gal re­course for seek­ing jus­tice from the courts.

MISTRY INI­TI­ATED LE­GAL AC­TION AGAINST TATA SONS

The for­mer Chair­man of Tata Sons, Cyrus Mistry on 19th De­cem­ber sur­prised every­one by an­nounc­ing his res­ig­na­tion from the Boards of Tata Mo­tors, In­dia Hotel Com­pany, Tata Power and Tata Chem­i­cals. He had been in the re­cent past in­volved in a fierce tus­sle with the man­age­ment of Tata Sons over his be­ing re­moved from the Di­rec­tor­ship of the Tata Group of Com­pa­nies. He said that he had quit vol­un­tar­ily in the best in­ter­ests of the com­pa­nies, but would con­tinue his quest for jus­tice. He then, on 20th De­cem­ber filed a suit in the Na­tional Com­pany Law Tri­bunal (NCLT) against the Tata Sons al­leg­ing op­pres­sion and mis­man­age­ment. He said that he had de­cided to shift gears and take le­gal re­course for up­hold­ing the virtues of rule of law and eq­uity. The Tata Sons re­sponded that it had main­tained the high­est stan­dards of cor­po­rate gover­nance in all its

trans­ac­tions and termed the outcome as un­for­tu­nate. On 21st De­cem­ber, Mistry filed a plea for in­terim re­lief be­fore the NCLT for re­strain­ing Ratan Tata, the present Chair­man of Tata Sons from at­tend­ing meet­ings of the Tata com­pa­nies. He also sought that the Tata Sons be re­strained from re­mov­ing Cyrus Mistry from the Di­rec­tor­ship of the com­pa­nies. He prayed be­fore the Tri­bunal for di­rect­ing the Tata Sons not to is­sue any se­cu­ri­ties which re­sulted in ad­versely af­fect­ing the paid up cap­i­tal of the pe­ti­tioner. The Tri­bunal how­ever, re­fused to hear the plea and gave time to Tata Sons to file its re­ply to the pe­ti­tion.

TATA SONS SUED MISTRY FOR BREACH OF CON­FI­DEN­TIAL­ITY

The Board­room drama took a dras­tic turn when on 27th De­cem­ber, the Tata Sons sued its for­mer Chair­man Cyrus Mistry of breach of con­fi­den­tial­ity rules. It ac­cused that Mistry com­pro­mised the se­crecy of the com­pany doc­u­ments by mak­ing the sen­si­tive data pub­lic per­tain­ing to board meet­ings and fi­nan­cial in­for­ma­tion. The le­gal no­tice served by Tata Sons al­leged that Mistry had de­lib­er­ately at­tached the vi­tal con­fi­den­tial in­for­ma­tion of the con­glom­er­ate to his pe­ti­tion sub­mit­ted to the Na­tional Com­pany Law Tri­bunal. It con­tended that Mistry acted in com­plete vi­o­la­tion of the con­fi­den­tial­ity un­der­tak­ing to the

Tata Sons and had in­fringed the Tata code of con­duct. The Tata Sons also asked Mistry to re­turn all the clas­si­fied pa­pers in his pos­ses­sion re­lat­ing to the com­pany. In its le­gal no­tice dated 29th De­cem­ber, Tata Sons de­manded Mistry to sign an un­der­tak­ing within 48 hours that he will not dis­close any sen­si­tive in­for­ma­tion of the com­pany in the fu­ture. The no­tice al­leged that Mistry had wrong­fully and dis­hon­estly taken the sen­si­tive in­for­ma­tion out of the com­pany premises with­out the con­sent of the man­age­ment. Mistry re­sponded that the no­tice was a mere re­quest by the Tata Sons and he would re­spond only in the court of law.

WHAT HAP­PENS IN 2017?

The cor­po­rate bat­tle be­tween the man­age­ment of Tata Sons had badly af­fected the rep­u­ta­tion of the Tata Group. The feud had seen the level of slugfest to hit an ebb when the man­age­ment of Tata Sons and Mistry were locked in a filthy war of words and cross al­le­ga­tions of cor­po­rate gover­nance vi­o­la­tions. It was fol­lowed by Nusli Wa­dia slap­ping a defama­tion suit against Tata Sons for re­mov­ing him from the post of Di­rec­tor of the com­pa­nies. The for­mer Chair­man, Cyrus Mistry also took le­gal re­course and filed a pe­ti­tion be­fore the Na­tional Com­pany Law Tri­bunal ac­cus­ing Tata Sons of op­pres­sion and mis­man­age­ment. Ratan Tata had on 24th De­cem­ber termed the le­gal suit as a move to tar­nish his per­sonal rep­u­ta­tion and that of the Group as well. He also thanked the share­hold­ers for their grat­i­tude and con­tin­u­ous sup­port to the Group. In re­sponse, Tata Sons gave a le­gal no­tice to Mistry to not dis­close the con­fi­den­tial in­for­ma­tion of the com­pany and re­turn the doc­u­ments in his pos­ses­sion. On 30th De­cem­ber Ratan Tata ac­knowl­edged the prodi­gious sup­port of the em­ploy­ees of the Tata Group and called the Board­room tus­sle to be a wil­ful and well-or­ches­trated at­tempt to sub­vert the core val­ues of Tata Group. The out­comes of the le­gal suits filed by Mistry, Wa­dia and Tata Sons would take time to fruc­tify, but the im­broglio has def­i­nitely dented the aura of trust and ho­li­ness as­so­ci­ated with the Tata Group. It will be in the best in­ter­ests of one of In­dia’s old­est and most trusted con­glom­er­ates that the dif­fer­ences be­tween the top brass are am­i­ca­bly set­tled rather than pur­su­ing the cur­rent le­gal re­course, the outcome of which is bound to get filth­ier and ig­no­ble.

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