Mumbai: Tata Sons and its ousted chairman Cyrus Mistry have been exchanging barbs via petitions and affidavits since the latter fired the first salvo by approaching the National Company Law Tribunal (NCLT) on 20 December. Marked by allegations and counter allegations, Mint looks back at the past five weeks and highlights of some of main affidavits since the legal feud broke out between the parties. The NCLT starts hearing the petition from Tuesday.
Mistry family’s allegations
Mismanagement at Tata Sons and oppression of minority shareholders—Ratan Tata abused the powers vested in him as the erstwhile chairman of the Tata group in terms of the various businesses entered into which includes Nano car project, acquisition of Corus, Tata Teleservices, Air Asia, dealings C. Sivasankaran and M Pallonji & Co.
Corporate governance breakdown and excessive interference by Tata Trusts
Tata and other trustees, acting as “shadow directors”, have been controlling Tata Sons as a “super-board” with trustee-nominated directors accustomed to act under the instructions of Tata Trusts, which hold 66% in Tata Sons. The trustees sought to micro manage the governance of Tata Sons.
Illegal removal of the executive chairman
The executive chairman was removed without any notice or explanation.
Abuse of articles of association
The article of associations of Tata Sons, whose aim was to have a governance framework to protect the firm’s interests, have been converted into a regime enabling the control of Tata Sons by Ratan Tata and Noshir Soonawala, trustees of the Tata Trusts.
Violation of insider trading norms
Law violations by Tata and Noshir Soonawala , a trustee for procuring unpublished price sensitive information from listed Tata companies.
Tata Son’s response
Issues raised are nothing but a ruse by Cyrus Mistry. This is merely to publicly express his displeasure at the loss of his office as the executive chairman of Tata Sons. It is an attempt to besmirch the reputation of the Tata group.
Mistry’s removal not illegal
Mistry’s removal was resolved upon by a majority of the directors (seven out of nine directors who voted in favour of Mistry’s removal as the executive chairman).
Mistry was well acquainted with the affairs of Tata Sons and the Tata group
This was much before Mistry became the executive chairman in December 2012. He was part of the board’s deliberations in respect of several decisions which he is now attempting to call into question.
Mistry is seeking to justify the inexplicable delay by the petitioner in availing judicial remedies. He did not take the requisite step to address the alleged mismanagement and oppression nor did he bring it to the notice of the board of Tata Sons. He rose from slumber to voice this grievance only after he was removed.
Allegations levelled against Ratan Tata misconceived
All decisions at Tata Sons and Tata companies have been taken by the relevant management teams. In his own draft presentation Mistry had proposed an active and consistent engagement with the trusts and the trust nominee directors.
No special treatment to C. Sivasankaran
The allegations with respect to the instances of dealings with C. Sivasankaran, chairman of the Siva group, are not relevant to the present proceedings for alleged oppression of the petitioners and alleged mismanagement of the affairs of Tata Sons. There is absolutely nothing on record to suggest that these transactions involved a degree of undue favour or special treatment at the behest of Tata group companies.
Flawed business decision do not tantamount to acts of oppression
Assuming but without conceding that these business decisions were in fact flawed and imprudent, such transactions do not tantamount to acts of oppression or mismanagement as is the settled legal position.
What Mistry family has asked the NCLT
•Wind up Tata Sons board and appointment of an administrator or appoint a retired Supreme Court judge as the non-executive chairman and appoint new independent directors.
•Restrain the so-called interim chairman from attending any meeting of the board of directors.
•Restrain Noshir Soonawala from interfering in the affairs of Tata Sons.
•Direct Tata Sons to not issue any securities which could lead to a dilution in the present equity capital.
•Restraint the respondent to the petition which includes Tata Sons, Tata Trusts and Ratan Tata from making any changes to the article of association unless it’s done with the consent of the honourable tribunal.
•Appoint an independent auditor to conduct a forensic accounting and independent investigations into the transactions of Air Asia, involving Mehli Mistry and associated entities, C. Sivasankaran and his business entities. And submit a report to the tribunal.
•Appoint an inspector to investigate into the of Sebi’s prohibition of insider trading breach by Ratan Tata and Noshir Soonawala and submit a report to the tribunal so that it can refer the findings to the Serious Fraud Investigation Office of the ministry of corporate affairs.
Appoint a forensic auditor to re-investigate
•Direct Tata Trusts to bring back into Tata Sons the funds used by Tata Sons for acquiring shares of Tata Motors.
•Restrain Tata Sons from entering any new line of business or acquiring any new business without the consent of the tribunal and that to after it has been discussed with the board of directors without applying 121 of article of association.
•Restrain the trustees from interfering in affairs of Tata Sons and various companies that are part of Tata group.
•Restrain the existing selection committee from discharging any duty and appoint a new committee.
•Direct that no candidate selected by the committee pursuant to the article 118 of the article of association of Tata Sons be appointed without the consent of the Tribunal.
•Direct Tata Sons not to demand unpublished price sensitive information from any listed Tata group company
•Pass an order which is in the interest of justice and brings an end to the acts of oppression and mismanagement.
Face-off: Ratan Tata vs Cyrus Mistry
The genesis of the current crisis emanated from the personality differences between the then chairman of Tata Sons and chairman emeritus. Here are the few key issues which became the bone of contention between the two.
Allegations against Ratan Tata
•A chairman who never retired.
•His insistence of being a “super board” by wanting to pre-vet and pre-decide what gets formal approval to the Tata Sons board shows he was never happy being chairman emeritus but saw himself as chairman who never retired.
•Board of Tata Sons removed Mistry at the behest of Ratan Tata.
•It was under the influence of Tata that the board ousted Mistry.
•Remote controlling operations of Tata group companies.
•Tata was seeking to control key decisions in key Tata group companies through abuse and misuse of article of association. Any deviation from the approach sought by him would be attacked by him as a violation of articles of association.
•Aviation misadventure, Nano car project and flawed overseas acquisition strategy. Ratan Tata’s passion for flying and aviation industry in general led the Tata group into aviation business. Every decision in the sector relating to Taj Air, B Jets, Piaggio Aero and more recently AirAsia and Vistara has inflicted serious damage to Tata group and to Tata Son’s interests.
As there is no line of sight to profitability for the Nano, any turnaround strategy for the company requires to shut it down. Emotional reasons alone have kept the company away from this crucial decision. The foreign acquisition strategy, with the exceptions of JLR and Tetley, had left a large debt overhang.
Friends of Ratan Tata
While some of them were bestowed powers to commit serious investment decisions on behalf of the Tata Sons while others were granted extraordinary and undue favours”. These include Mehli Mistry, the chairman of M. Pallonji group, won contracts from Tata Power Co. Ltd at rates much higher than the prevalent market rates, while due to the special treatment, C. Sivasankaran, chairman Siva group, made a fortune by investing in Tata Teleservices Ltd (TTSL).
RATAN TATA’s RESPONSE
On him being a super board
The allegations are unfounded. It is at Mistry’s invitation that he was made chairman emeritus. Such an invitation would not have been extended had Mistry harboured such fundamental objections to Tata’s term as chairman. Even upon assuming office, Mistry continued to seek Tata’s guidance and views.
On Mistry’s removal
Mistry’s removal as the chairman of Tata Sons was led by the complete erosion of confidence and widening of trust deficit amongst the board of directors of Tata Sons and a similar trust deficit between Mistry and Tata Sons’ principal shareholders.
On remote controlling operations
Tata offered his opinion only on being asked by Mistry and his views were not unsolicited. Tata also presented his well-intentioned point of view and shared his thoughts wherever he felt that doing so would further the best interests of Tata group. To now colour this as “interference” amounting to a case of oppressive conduct is regrettable to say the least. Mistry’s petition is nothing but a personal attack with a view to besmirch Tata based on false and baseless allegations.
The decision to acquire Corus at the stipulated price was the unanimous and conscious decision of the entire board of directors of Tata Steel in 2007. In fact, the board of Tata Sons, including Mistry, passed a board resolution for financing the acquisition by Tata Steel.
On Tata’s persistent resistance to shelve Nano project
He did not raise any objections in view of the volumes and contributions being made by the project. It is entirely without basis for Mistry to contend that it was Tata who thrusted the decision to continue with Nano upon the incumbent management of Tata Motors.
On aviation misadventure
The investments made by Tata Sons in the aviation sector, was an unanimous decision of the board. In fact, Mistry in his webcast to all the employees of Tata group recognized Tata’s contribution in the aerospace plans. The documents placed on record by Mistry himself reveal that he constantly sought Tata’s advice and inputs on the issues inflicting Tata Sons in the aviation sector.
Response to the allegations regarding the special relationships
On C. Sivasankaran
It is highly unjustified that Mistry’s after all these years contends that TTSL investment or any other engagement with Sivasankaran’s companies, was driven by personal relationships rather than the collective commercial wisdom of the board of Tata Teleservices Ltd.
On Mehli Mistry
It is also wrong to say that when Mistry took over as executive chairman of the Tata group, he pursued a policy of all Tata group companies awarding large contracts solely because of competitive bidding to ensure that the Tata group companies receive the maximum benefit possible from their contracts with third parties. Such statement clearly insinuates that before Mistry’s tenure, the contracts were being awarded by the Tata group companies without following a due process.