After a bitter eight-week boardroom battle against Ratan Tata’s “illegal coup”, ousted Tata Sons chairman Cyrus Mistry on Monday quit from the boards of six listed companies, including Tata Motors and Indian Hotels. He vowed to shift his fight to a “larger platform” as the “coercive action taken by Tatas against various stakeholders was making him uneasy”.
In an interview to Business Standard, Mistry promised to take his fight against the Tatas to a legal forum but did not give details. “In the past eight weeks, I saw a lot of coercive action from the Tatas towards shareholders, debt holders and employees, which is making all the three uncomfortable. In various representations to shareholders, I had said it was not about me or about my position. My resignation proves that,” Mistry said.
He would, however, continue to remain a director on the board of Tata Sons. The announcement of Mistry’s resignation came after he attended a “routine” Tata Sonsboard meeting during the day. Monday’s board meeting brought Mistry and his former mentor, Tata, in the same room for the first time (since October 24) but they did not speak to each other, according to sources.
“The interests of employees, shareholders and other stakeholders of the Tata group would be better served by (me) moving away from the forum of extraordinary general meetings (EGMs),” Mistry said in a two-page letter. “But, the time has come to take matters to their logical conclusion. I will work on protecting the interests of the Tata group and realising the vision of our founder Jamsetji Tata, until my last breath,” he added.
“Mistry can move the National Company Law Tribunal against Tata Sons for oppression of small shareholders. He can also move the Sebi (Securities and Exchange Board of India) if he has information that the Trusts had indulged in inside-trading or did not follow corporate governance norms,” said R S Loona, a Mumbai-based corporate lawyer.
In response to Mistry’s resignation and his statement, Tata Sons said it was a deliberate strategy on his part, knowing well that an overwhelming majority of the shareholders were not in support of his actions. “Unfortunately, Mistry continues to make baseless, unsubstantiated and malicious allegations using selective disclosures of information against the very institution he claims to have the highest regard for,” Tata Sons stated.
Tata Sons said it resented Mistry’s claims to align with the values and ethics of Jamsetji Tata and the Tata Group.
With the resignation, the EGMs of the five listed companies, beginning with Indian Hotels on Tuesday, followed by Tata Motors, Tata Steel, Tata Chemicals and Tata Power, will not carry the resolution to remove Mistry. He was chairman of all these companies. But the resolution to remove Nusli Wadia as an independent director of Tata Steel, Tata Motors and Tata Chemicals would continue. Wadia has already sued the Tatas for defamation and has moved the Sebi, charging the Tatas of corporate governance lapses.
Mistry was removed from the board of Tata Sons, the holding company of the Tata group, on October 24 and the board appointed 78-year-old Ratan Tata as an interim chairman. Following this, a bitter public spat broke out between Mistry and Tata, with the former chairman accusing his one-time mentor of saddling the group with $18 billion of potential write-downs and serious lapses of corporate governance. Mistry had also accused Tata of signing gold-plated deals with his close friends at the cost of group companies. The boardroom battle has led to a loss of ~77,000 crore of market capitalisation for the Tata group companies.
Mistry’s sudden ouster had divided corporate India as he received unprecedented support from independent directors of many Tata companies, including Indian Hotels, that had corporate doyens like Deepak Parekh, Nadir Godrej and Keki Dadiseth on its board.
Independent directors on the board of Tata Chemicals and Tata Power had also supported Mistry. The independent director of Tata Consultancy Services, however, did not support Mistry and had appointed Ishaat Hussain as an interim chairman. The directors of Tata Steel and Tata Global were divided over supporting Mistry.
“Many have asked me why I have raised issues only after Tata staged the illegal coup. Unknown to the outside world, I had confronted and was grappling with serious governance problems and ethical issues for a long time. My efforts were to cleanse the system from the within, which may be the real reason for my removal,” he said.
“In recent weeks, the conduct of those at the helm of affairs has further unmasked the absence of ethical standards,” Mistry said. He added his fight was a movement for cleaning up governance and regaining lost ethical ground. “It is time to shift gears, up the momentum and be more incisive in securing the best interests of the Tata Group.”
“I have shifted this campaign to a larger platform and also one where the rule of law and equity is upheld. I had initially not thought that one would need to seek an external forum to adjudicate issues that should never have arisen in the first place. I believe my actions are consistent with protecting the long-term interests of the Tata Group,” he said.
By removing himself from the EGMs, Mistry said he was seeking to reinforce his consistent position that this was not a fight for a position but a fight to more effectively secure long-term reform to keep the Tata group on a sustainable path. “Events of the past eight weeks have been about saving a legacy. A legacy of values and ethics inherited from the founder of the Tata Group Jamsetji Tata,” Mistry said.
Mistry said Tata Trusts, which controls about 66 per cent of Tata Sons, wielded no voting power until about 15 years ago. The Company Law vested voting power in the hands of public trustee appointed by the government, who would decide how to vote shares held by the public charitable trusts.
“My family’s voting strength constituted the largest minority voice outside the government. In this role, over the decades, we consistently implemented the values and ethics of Jamsetji Tata and our actions protected this incredible institution. Over the past five decades, our support for the Tata Trusts has been one of guardianship. We ensured that we did the right thing and for the right reasons — regardless of the consequences,” Mistry said.
“I have been attempting to resolve the governance break-down at Tata Sons for a considerable period of time. Ratan Tata and Noshir Soonawala, Trustees of Tata Trusts, who had retired fromTata Sons after multiple extensions, have refused to give up participation in key decisions involvingTata Sons and the operating companies, including those listed in India and abroad,” Mistry said in a videotaped message.
“This has undermined the Tata Sons board apart from exposing the Tata Group, including the boards of directors of various listed companies to serious regulatory consequences. Such behaviour has adverse implications for the beneficiaries of the Tata Trusts, which are public charitable trusts,” Mistry added.
The Tata Sons statement said: “As Tata group, we are committed to upholding the highest standards of ethics and value systems put in place by the founders. It is these that have made the Group what it is today. We will do whatever it takes to protect the interests of all stakeholders of the Tata group.”