MUMBAI: Former Tata Sons chairman Cyrus Mistry has opposed the appointment of Natarajan Chandrasekaran as his successor and may even be preparing to open another legal front challenging the decision, officials in the know said.
A day before the board of Tata Sons met to consider Chandrasekaran as the chairman last week, Mistry shot off an angry letter to his fellow board members challenging the legality of the appointment.
“Unlike the October board meeting when the decision to sack Mistry was not mentioned in the board agenda circulated before, this time the members were aware of what to expect. Mistry is still a director of Tata Sons and the agenda papers were circulated to him as well. That prompted the mail from him,” said an official aware of the communications.
Mistry did not physically attend the board meeting the following day.
Details of Cyrus’ possible legal strategy could not be independently verified but for some this could be a potential precursor to a fresh complaint before the court.
Mistry — only the second group chairman without the Tata surname — was sacked on October 24 last year. He has already challenged the decision in the National Company Law Tribunal (NCLT). In his petition, Mistry alleged collusion between Tata Sons and Tata Trusts and oppression of minority interests at the $103-billion Indian conglomerate.
The petition was filed by Cyrus Investments and Sterling Investments — Mistry’s investment companies. It also alleged that Tata Sons’ move to call an extraordinary general meeting on February 6 violated the undertaking given by its lawyers at the NCLT in December.
In his missive to the board members on January 11, Mistry argued that Chandrasekaran’s appointment was illegal considering the matter was still sub-judice.
Tatas after getting a green signal from their legal advisors decided to proceed with the board meeting.
“The Tata Sons Board meeting held on January 12, 2017 and the appointment of N Chandrasekaran as chairman of Tata Sons have been done as per the company’s Articles of Association and relevant laws,” a Tata Sons spokesperson told ET.
Sources close to Mistry said that he was not comfortable attending the board meet since the Tatas had violated undertakings given by them in court.
“At this stage, we do not wish to discuss next steps in terms of legal strategy,” people close to Mistry said.
Article 118 of the Articles of Association of Tata Sons, passed under a special resolution following a Tata Sons EGM on December 6, 2012, lays out the terms for the appointment of the chairman. It says: “For the purpose of selecting a new Chairman of the board of directors and so long as the Tata Trusts own and hold in the aggregate at least 40% of the paid up Ordinary Share Capital of the Company for the time being, a Selection Committee shall be constituted in accordance with the provisions of this Article to recommend the appointment of a person as the Chairman of the Board of Directors and the Board may appoint so recommended as the Chairman of the Board of Directors, subject to Article 121 which requires the affirmative vote of all Directors appointed pursuant to Article 104B.”
Similarly, Section 196 and 104 (i) (ii) of Companies Act also stipulates the grounds for the appointment of chairman, MD and directors.
Officials close to Tatas argue that Mistry does not have a case as his petition before NCLT only talks of his illegal removal. Moreover, his prayers also included that the selection panel entrusted to select a new chairman should not meet, but the interim relief was denied on December 22 last year.
Mistry also moved for contempt proceedings, but in the contempt hearing, his lawyers did not mention Chadrasekaran’s appointment even once. “He moved the contempt petition only for removal of a director, not for the appointment of a new chairman. His mail, therefore, is contrary to his own submission before court on Monday. His lawyers argued on points which include removal of director, amendments to articles and issuance of new shares of Tata Sons. None of this relate to appointment of chairman,” said an official in the know, who did not wish to be quoted
On Monday, Mistry’s legal counsels, Janak Dwarkadas and Somasekhar Sundaresan argued that Tata Sons and Tata Trusts agreed that they would not take any incremental action until an earlier petition was heard by the NCLT on January 31.
Tata Sons lawyer Abhishek Manu Singhvi said the tribunal’s December 22 directives just meant that no legal action or proceedings could be undertaken by the company, Tata Trusts or the Mistry family firms. Tata Sons was, however, allowed to take company related decisions, he said. By filing the petition, the former chairman is trying to get the tribunal to stop Tata Sons from holding a planned shareholder meeting to oust him as a director, he claimed.