BSE, NSE seek audit of Tata companies amid Cyrus Mistry fight

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Mumbai: National Stock Exchange of India Ltd (NSE) and BSE Ltd have written to some listed companies in the Tata group seeking a secretarial audit by their audit committees, four people with direct knowledge of the matter said, including two exchange officials.

A secretarial audit is done to check compliance of various legislation including the Companies Act.

The audit committees will check disclosures made by these firms to see whether they are adequate, the four people added.

The Indian Express reported on 5 December that the Securities and Exchange Board of India (Sebi) had asked exchanges to tell listed Tata firms to undergo an audit after allegations of corporate governance violations were raised by Cyrus P. Mistry, the ousted chairman of Tata Sons Ltd, the group holding company.

Spokespersons for NSE and BSE declined to comment on specific queries sent by Mint.

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Sebi itself is examining whether the Tata companies have violated any provisions of the Sebi Act, particularly those relating to listing norms and insider trading rules.

On 8 November, The Economic Times reported that the capital markets regulator was examining whether the Tata companies disclosed price-sensitive information to Tata Sons directors and Tata Trusts trustees.

It remains an examination, said one of the four people cited above, all of whom spoke on condition of anonymity, and is not yet a “formal investigation”.

Sebi started its examination after Mistry’s leaked letter to Tata Sons directors said some group companies were staring at a potential $18 billion writedown.

He also cited the example of a board meeting that was held up because directors nominated by Tata Trusts had to leave for an hour to seek instructions from Ratan Tata, who is chairman of Tata Trusts.

“Exchanges are front-line regulators and it is necessary for them to ensure all the time that the companies listed (on them) are compliant. So, if there is any claim or complaint made by anyone regarding the accounts of a listed company or (disclosure related violations), the exchange needs to verify from the auditors if all the due diligence has been followed by the concerned listed company,” said the second of the four people cited earlier.

A day after Mistry’s letter became public, NSE wrote to Indian Hotels Co. Ltd, Tata Motors Ltd, Tata Steel Ltd, Tata Power Co. Ltd and Tata Teleservices (Maharashtra) Ltd—companies that were referred to as legacy hotspots in Mistry’s letter—seeking clarifications.

The companies replied to the exchanges stating that they have made full disclosures of material events.

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Sebi did not respond to an email seeking comment.

In an email, a Tata Sons spokesperson said that the matter concerns group companies and not Tata Sons.

A spokesperson for Tata Motors said the company has received letters from BSE and NSE and has responded to them.

“The news confirmation letters from the Exchanges are also available on their websites. We have no further comments to offer,” the spokesperson said.

Tata Chemicals, Tata Global Beverages, Tata Power, Tata Steel, Indian Hotels and Tata Consultancy Services Ltd didn’t respond to emails.

These developments come even as Nusli Wadia, an independent director on the boards of three listed Tata companies—Tata Chemicals, Tata Steel and Tata Motors—has also complained to Sebi about violations of insider trading norms.

He also claimed that the shareholder resolutions moved by the three companies seeking his ouster were in violation of corporate governance norms. Wadia’s complaint will be covered by Sebi’s ongoing examination, said the first of the four people cited earlier.

Six Tata group companies are also holding shareholder meetings to oust Mistry as director.