Cyrus Mistry hits back at Tata Group with slew of allegations: Fraudulent transactions, unethical ways

Ousted chief Cyrus Mistry attacks Ratan Tata, ‘legacy hotspots’; Singhvi rises to Tata defence.

By: ENS Economic Bureau | Mumbai | Updated: October 27, 2016 7:26 pm
cyrus mistry, cyrus mistry sacked, cyrus mistry tata, cyrus mistry lame duck chairman, ratan tata, tata interim chairman, tata, tata group, business news, companies, india news, indian express news Cyrus Mistry outside Bombay House. (Exprtess Photo: Kevin DSouza)

Ousted as chairman of Tata Sons in a boardroom coup Monday, Cyrus Mistry has hit back, levelling a series of allegations against the Tata Group and predecessor Ratan Tata including those relating to fraudulent transactions, unethical practices and conflict of interest. Flagging “total lack of corporate governance” in the over $100-billion conglomerate where he says he was reduced to a “lame duck chairman”, Mistry has questioned investment decisions during Ratan Tata’s tenure in several group companies — he has called them “legacy hotspots” — and has warned the board and trustees of a potential $18-billion writedown.

WATCH VIDEO: Tata Sons Rubbishes Cyrus Mistry’s Allegations: Here’s What Happened

While the official spokesperson of Tata Sons declined comment on Mistry’s allegations, Abhishek Manu Singhvi, senior advocate advising Tata Sons on the matter, said: “No purpose is going to be served by washing dirty linen in public. To every allegation, severe counter allegations are possible. If an overwhelming majority of the nine wise men and women of the board lost confidence in the chairman, what’s the point of making allegations.”

Read Also: Full Text: Cyrus Mistry’s mail to Tata Sons says he was reduced to a ‘lame duck’ chairman

“The factors which go to making loss of confidence are obviously diverse and serious and include economic, corporate, managerial, moral and ethical issues. But even courts do not tread into the review of such causes. Hence, the press should desist from speculative misadventure,” Singhvi said.

In an email to the board of Tata Sons and trustees of Tata Trusts Tuesday, Mistry said: “I cannot believe that I was removed on grounds of non-performance. I am not sure if the individual board members and trustees truly appreciated the extent of the problems I had inherited.”

“Prior to my appointment, I was assured that I would be given a free hand. The previous Chairman (Ratan Tata) was to step back and be available for guidance and advice as and when needed.” But after his appointment, Mistry said, the Articles of Association were modified, changing the rules of engagement between the trusts, the board of Tata Sons, the chairman and the operating companies.

WATCH VIDEO 

Mistry hits back: lack of corporate governance, was lame duck chairman

“Inappropriate interpretation indeed followed and it severely constrained the ability of the group to engineer the necessary turnaround and as feared, the inappropriate implementation created a flux in the decision-making process,” he said.

According to Mistry, the foreign acquisition strategy, with JLR and Tetley being exceptions, had left a large debt overhang. “The European steel business faced potential impairments in excess of $10 billion, only some of which has been taken as of date. Many foreign properties of Indian Hotels and holdings in Orient Hotels have been sold at a loss… Indian hotels, beyond flawed international strategy, had acquired the Searock property at a highly inflated prices and housed in an off balance sheet structure. In the process of unravelling this legacy, Indian Hotels has had to write down nearly its entire networth over the past three years. This impairs its ability to pay dividends,” he said. The telecom business, he said, has been continuously haemorrhaging. “If we were to exit this business via fire sale or shut down, the cost would be $ 4-5 billion. This is in addition to any payout to DoCoMo of at least a billion plus dollars. The original structure of DoCoMo transaction raises several questions about its appropriateness from a commercial or prudential perspective within the then prevailing Indian legal framework,” Mistry alleged.

On the power business, he said Tata Power aggressively bid for the Mundra project based on low-priced Indonesian coal and a change in rules now pose a threat to future capital impairment.

cyrus mistry, ratan tata, tata sons, tata, cyrus pallonji mistry, cyrus mistry sacked, Cyrus Mistry interview, Tata group, India business, Ratan Tata, tata and sons, cyrus mistry, tata, tata news, ratan tata interim chairman, business news, indian express news Ratan Tata in Mumbai on Tuesday. (Source:: Express photo by Ganesh Shirsekar)

Mistry’s email is critical of Ratan Tata and his Nano car project: “Nano’s product development concept called for a car below Rs one lakh, but the costs were always above this. This product has consistently lost money, peaking at Rs 1,000 crore. 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 us away from this crucial decision. Another challenge in shutting down Nano is that it would stop the supply of Nano gliders to an entity that makes electric cars and in which Mr Tata has a stake.” On the performance of the portfolio, he said, “if we look at the aggregate data between 2011 and 2015 and limit the analysis largely to the legacy hotspots (Indian Hotels, Tata Motors PV, Tata Steel Europe, Tata Power Mundra and Tata Teleservices), it will show that the capital employed in those companies has risen from Rs 132,000 crore to Rs 196,000 crore (due to operational losses, interest and capex). This figure is close to the networth of the group which is at Rs 174,000 crore. A realistic assessment of the fair value (of) these businesses could potentially result in a writedown over time of about Rs 118,000 crore”.

Tata Capital, he said, had a book that required “significant clean up on account of bad loans to the infrastructure sector”.

Attacking Tata’s investment in the airline business, Mistry said: “Early in my tenure, our foray into the aviation sector began when Mr Tata ushered me into his office and handed me a report on Air Asia… and wanted the proposal tabled at the forthcoming Tata Sons board meeting. My pushback was hard but futile… A few months later, I was surprised to be confronted with a similar situation requiring me to execute a fait accompli JV with Singapore Airlines… The passion for the airline sector has led Mr Tata to continue his involvement with the strategy of the two airlines.”

He said “board members and trustees are also aware that in the case of Air Asia, ethical concerns have been raised with respect to certain transactions as well as the overall prevailing culture within the organisation. A recent forensic investigation revealed fraudulent transactions of Rs 22 crore involving non-existent parties in India and Singapore. Executive Trustee, Mr Venkatraman, who is on the board of Air Asia and also a shareholder in the company, considered these transactions as non-material and did not encourage further study. It was only at the insistence of independent directors, one of who immediately submitted his resignation, that the board decided belatedly to file a first information report”.

An Air Asia spokesperson declined comment on this allegation.

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First Published on: October 27, 2016 5:31 am
  1. G
    George
    Oct 27, 2016 at 2:53 am
    Absolute power corrupts anybody. It is a shame that someone at such a high position has to be removed so unceremoniously. Speaks too poorly of the Tata empire.
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    1. A
      Anand
      Oct 27, 2016 at 2:55 am
      I believe in Tata - specially Ratan Tata - Hence - he did the right thing to save it.
      Reply
      1. A
        Anand
        Oct 27, 2016 at 2:34 am
        I smell an another Sytyam that has been prevented now!!
        Reply
        1. A
          Anand Mohan
          Oct 27, 2016 at 3:15 am
          The only long term remedy is that govt. issue a reasonable and transparent direction to Tata Sons Ltd to float more shares and list company in stock exchange for trading. Today , Tata Sons Ltd is a highly closely held company where 66% shares are held by Ratan Trusts. These Ratan Trusts are running show at Tata Sons like proprietors and are bulldozing the aspirations of minority shareholders. Ordinary person can just not buy single share of Tata Sons Ltd.
          Reply
          1. A
            ashok s
            Oct 27, 2016 at 2:09 am
            Tata scam worth billion s. Serious allegations and Mr tata is silent
            Reply
            1. A
              ashok
              Oct 27, 2016 at 2:03 am
              Mr Tata built his empire during congress regime when there was no compeion and rules were in its favour today they are feeling the heat.Mr Ratan who said that in the country intolerance is growing it should be that intolerance was growing within himself
              Reply
              1. P
                Pawar RS
                Oct 27, 2016 at 5:10 am
                Cyrus should gracefully go away and keep his trap shut.Stupid A*** H*** as a senior Tata Sons executive quipped !!
                Reply
                1. J
                  Jawahar D.R
                  Oct 27, 2016 at 4:11 am
                  Why SEBI, stock exchange jump the guns to question Ratan Tata based on the letter of outsted Mr. Mistry. Many of TATA group companies are listed and disclosures are made based on board meetings and audited results. Has SEBI questioned Ambani for refusing audit of gas reserves requested by Govt of India ? Like any other business conglomerate, TATA is going thru rough weather and will definitely turn around. In the world of Ambanis, Adanis, etc., TATA is different and shall continue to occupy the iconic space in the Business World
                  Reply
                  1. J
                    jeganathan
                    Oct 30, 2016 at 5:44 pm
                    There goes the Bharat Ratna!lt;br/gt;lt;br/gt;It was being speculated that Ratanji was being considered for the Bharat Ratna. The Board Room coup has certainly dimmed his prospects. Cyrus too will fade away into oblivion from where he came. Winners are the (politico) Legal luminaries who will make money and fame while the companies and shareholders will be the losers.
                    Reply
                    1. M
                      M MD
                      Oct 27, 2016 at 6:54 am
                      CYRU MISTRY WAS ENJOYING BENEFITS OF TATA AND ONCE HE WAS SENT OUT lt;br/gt;HE STARTED TO CRY. HE OUGHT TO HAVE RESIGNED EARLIER IF HISWORDS WERE TRUE. HE WAS LEGALLY REMOVED BY MAJORITY DECISIONS OF BOARD OF DIRECTORS
                      Reply
                      1. J
                        Joseph R Stephen
                        Oct 27, 2016 at 3:54 am
                        What was his RAT doing there for 4 years.lt;br/gt;lt;br/gt;JUST sleeping in his office room.lt;br/gt;lt;br/gt;real donkey
                        Reply
                        1. J
                          Joseph R Stephen
                          Oct 27, 2016 at 3:56 am
                          When he felt there is two centers of power, he should have resigned. He waited and spent 4 years of his life here.lt;br/gt;lt;br/gt;My god what a looser.
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                          1. P
                            p
                            Oct 27, 2016 at 3:04 pm
                            Cyrus Mistry is right here. His family has 18% stake in the company, so I feel he is sincere and trying to do right things to improve the fortune of tata companies. ratan data's behavior is totally rotten and disgraceful. Don't know why media projects ratan tata as some kind of saint, he is definitely not what he seems to be. he is power hungry megalomaniac. Indian media has slavish mentality, and is bought over by the rich and powerful in India, that's why Indian public never gets to know the truth.
                            Reply
                            1. P
                              p
                              Oct 27, 2016 at 4:41 pm
                              why did tata's have to buy british steel company when common sense and all market trends were showing that cheap chinese steel companies were driving all other steel companies out of business? Why start airline when in India it is mostly loss making enterprise? Instead of increasing the ries of employees of various tata companies, all the money was being wasted in these useless deals. TCS has been biggest cash cow of the Tata's and all the profit was being squandered in useless ventures like buying Corus Steel company, buying Jaguar/Land Rover automobile company from Ford while they were off loading loss making business, trying to sell Nano for less than what it took to manufacture them (and they were exploding all the time). What totally whimsical, irresponsible and dumb decisions? Why did they waste all their resources on unaffordable ventures? Why didn't they invest their profits on in-country Research and Development? Ratan Tata's vision is totally foolish, and I can't believe all the slavish mentality people lap it all up, and don't question anything.
                              Reply
                              1. K
                                Kejriwal Fan
                                Oct 27, 2016 at 5:32 am
                                This stupid circus must be immediately stopped. All their finances must be immediately snatched and their properties confiscated, and must be given to AIMPLB, who can use it for the welfare of muslims in India
                                Reply
                                1. K
                                  K Uppal
                                  Oct 27, 2016 at 6:54 am
                                  Another BJP backed move to control Tatar sons through misery: which will now go against rattan : anyone having shares in hold or get prepared for loss of major value
                                  Reply
                                  1. M
                                    mahendra thacker
                                    Oct 27, 2016 at 9:29 am
                                    Tata Singhvi TCS dictator = Complete Distruction.lt;br/gt;Thanks Ratan for doing it
                                    Reply
                                    1. K
                                      Kartha MN
                                      Oct 27, 2016 at 3:05 pm
                                      washing dirty linen in public ?
                                      Reply
                                      1. R
                                        Ramesh Nittoor
                                        Oct 27, 2016 at 1:14 am
                                        It could be a turning point for induction of professional management in Indian private sector. For long politics-business nexus meant control within family, and mediocre scions take over. Such model was ok with Congress kind of polity, but BJP now has a more matured polity to facilitate more compeve corporate policy making structure which is insulated from political linkages and works fully within the ambit of law. This qualitative change in Indian management scene is a pre-condition for rapid and a transformative change process. Tata, with its vast talent pool in its TAS cadre, may be uniquely placed to initiate the change process, and herald an IT kind of management revolution in manufacturing and service sector domains.
                                        Reply
                                        1. V
                                          Vedic_Citizen
                                          Oct 27, 2016 at 12:35 am
                                          Sad to see corporate bosses behave like anarchist Kujliwal
                                          Reply
                                          1. P
                                            ProdyotPran
                                            Oct 27, 2016 at 8:29 am
                                            Dear Cyruslt;br/gt;lt;br/gt;A piece of unsolicited advice - learn to bow out gracefully.lt;br/gt;This is exactly what Ratan Tata would have done had he been in your shoes.lt;br/gt;He is a man of substance.lt;br/gt;Show that you are too.lt;br/gt;-lt;br/gt;By mudding the pool in a bid to prove that you are victimised, you are actually proving to the contrary.lt;br/gt;-lt;br/gt;Had you walked out silently without mudding the pool respect for you would have grown exponentially.lt;br/gt;Alas! You are exponentially sliding.lt;br/gt;-
                                            Reply
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