Mumbai: In July, Tata Trusts formed a committee chaired by Ratan Tata to protect its interests in Tata Sons Ltd. Around the same time, Cyrus Mistry was preparing a governance document that sought to define the relationship between various Tata group entities.
The committee would “deliberate and take appropriate steps on all matters relating to the Trusts’ shareholding in Tata Sons Ltd and affiliated companies”, said a 7 July letter written by R.F. Savaksha and B.S. Taraporevala to F.N. Subedar, chief operating officer of Tata Sons. Savaksha and Taraporevala are, respectively, secretary and chief financial officer of the Sir Dorabji Tata Trust and Sir Ratan Tata Trust.
The committee would include N.A. Soonawala and Amit Chandra, trustees, and managing trustee R. Venkataramanan, said the letter, which was part of an affidavit filed by Mistry at the National Company Law Tribunal (NCLT) on 23 January. Mint has a copy of the letter.
After Mistry was ousted as chairman of the $103-billion group, his family-owned investment vehicles are fighting the Tatas at NCLT, alleging mismanagement of the holding company and oppression of minority shareholders.
The letter does not say what triggered the formation of the committee and there is no clarity on whether it ever met. Spokespersons at Tata Trusts, the largest shareholders in Tata Sons, and Mistry’s office declined to comment.
However, Mistry’s affidavit showed that the ousted chairman welcomed the move and was eager to work with this committee. In an 8 July email to Nitin Nohria, a Trust-nominated director of Tata Sons, Mistry wrote, “I think it’s important we now understand the role of the different forum and integration needed to avoid any confusion. When do the Trust(s) nominated directors interact with the committee and when do I?”
In his response, Nohria called the committee “a useful” idea, “especially for the long term when it may not have people like RNT (Ratan Naval Tata) and NAS (N. A Soonawala) who are familiar with Tata Sons”.
“Even in the near term it at least provides a designated forum that can provide guidance to the Trust nominee directors and be consulted on important matters. The question on when and on what matters this committee has to be consulted should certainly be clarified,” Nohria wrote.
“It (the letters and emails) clearly shows that the terms of engagement between the Trusts and Tata Sons were not clear,” said Shriram Subramanian, managing director and founder at proxy firm InGovern Research. According to Subramanian, the Tata Sons chairman will continue to be “pulled in all directions till there is a framework in place”.
The committee was formed at a time when records of correspondence between Ratan Tata and Mistry showed a widening rift between Tata Sons and Tata Trusts, which culminated in Mistry’s sacking .
This correspondence, now part of the affidavit filed by Mistry, showed that the ousted chairman had pressed for a mechanism that clearly delegates the roles and responsibilities between Tata Trusts and Tata Sons on several occasions.
For instance, in response to an 18 January 2016 letter from Ratan Tata where he expressed displeasure regarding disclosure of information on Indian Hotels Co. Ltd’s Sea Rock property, Mistry emphasized the need for Tata Sons to understand the process of consultation and the stage in the decision-making process when Tata Trusts would like to be involved and a point of contact in the Trusts who would convey their views.
He reminded Tata of the previous misunderstanding (Tata Motors Ltd’s Rs7,500-crore rights issue; Tata has said that Mistry didn’t keep the Tata Sons board informed about the details of the issue) and the subsequent plan as part of which Nohria and Tata were to “develop a protocol to institutionalize the process”, which did not happen.
“Trusts are involved in most of the decisions and hence the board of Tata Sons becomes redundant. For all these decisions, it is important that the Trusts are fully briefed if they are the ultimate decision maker,” wrote Mistry.
Proxy advisors said the relationship between various Tata entities should be clearly defined for new chairman N. Chandrasekaran to do his job properly.
“It has to be a consultative process. Perhaps they want the new chairman to settle in his new role before doing that,” said Amit Tandon, managing director at Institutional Investors Advisory Services