Mumbai: Nusli Wadia, an independent director on three Tata group company boards, has brought up alleged lapses of corporate governance by Tata Sons Ltd and trustees of the Tata Trusts, in a missive to shareholders of Tata Steel Ltd.
Wadia, who Tata Sons is seeking to remove as independent director from the boards of Tata Steel, Tata Motors Ltd and Tata Chemicals Ltd, has alleged certain trustees and the board of Tata Sons were given information by listed companies of the Tata group, in what could be violation of insider trading norms. He also said that the circular resolution floated to remove Mistry as chairman of Tata Steel did not follow the law.
Spokespersons at Tata Steel and Tata Sons said they didn’t have any immediate comments.
In the special notice seeking his ouster, Tata Sons had said that Wadia was acting in concert with Mistry and against the interests of the Tata group, and questioned his bonafides.
Wadia said he had requested the board to investigate the allegations made against him by Tata Sons and to take action against him if they were true. He also suggested that the board appoint a retired judge to investigate all charges and place his findings in front of shareholders.
But the board didn’t do any of these things, he wrote.
Wadia said that the circular resolution that was circulated for removing Mistry as chairman was not a draft resolution—as the law mandates—but one which was signed by several directors before it was sent to him, Mistry and Subodh Bhargava (another independent director).
“It is obvious therefore that this action by the directors concerned and the company secretary of Tata Steel are highly suspect, inappropriate and lacking in basic corporate governance, and I believe wholly illegal,” Wadia wrote.
He also wrote that he “believes” that Ratan Tata, Noshir Soonawala and the board of Tata Sons sought access to information and documents of Tata Steel, Tata Motors and other Tata firms, and also demanded that they be briefed by senior management of these firms.
This “could be regarded as violation of the Insider Trading Regulation (unpublished material and price sensitive information and knowledge),” wrote Wadia.
He also said that the Tata Sons overstated its role as promoter in the special notice. “To my knowledge no financial support has been given by Tata Sons to Tata Steel including in the acquisition and continuation of the investment in Tata Steel Europe,” Wadia wrote.
Offering evidence of his independence, Wadia said that he had differed several times with proposals during Ratan Tata’s chairmanship. He said that he was not in favour of the Corus Plc acquisition and that Tata Steel should focus on India. He also differed on providing financial resources to Tata Steel Europe.
“It is not the role of your Company to save jobs in the UK nor support its pension funds,” Wadia wrote to shareholders. “The role of your Board is to apply your funds to the most profitable growth opportunities.”
Wadia also said he was against Tata Steel’s large crossholdings in Tata Sons and several other group companies, which are “being maintained only to shore up the voting rights of the Tata Trusts.” He said that if these shareholdings could be divested, Tata Steel could save up to Rs1,400 crore in debt.
Wadia also questioned the role of independent directors asking whether they are truly independent “when the Promotor is permitted to propose and vote for his removal”.
He further urged the shareholders to seek the intervention of the central government and the Securities and Exchange Board of India to address the issue by ensuring that the resolution for the removal of the independent director should be a special resolution and be voted on by only non-promoter shareholders.
J.N. Gupta, managing director and co-founder at proxy advisory firm Stakeholder Empowerment Services (SES), said it’s incorrect to say the promoter is removing the independent director. The promoter, through the operating companies is only presenting a resolution to the shareholders, and finally, it’s the shareholders who will vote in favour or against.
“The independent director is independent for the purpose of a transaction. If he had so many concerns, why has he been silent all these years?” asked Gupta.