Cyrus Mistry’s allegations and how Tata Sons countered it

Tata Sons countered his allegations saying the former chairman was fully empowered to lead the group and its companies but had “overwhelmingly” lost the confidence of board members.

By: Express Web Desk | New Delhi | Updated: October 28, 2016 4:03 pm
Cyrus Mistry, Tata Group, Tata Sons, Tata, Cyrus Mistry news, cyrus mistry email, Cyrus Mistry Tata Sons, Cyrus mistry sacked Ratan Tata (L) with Cyrus Mistry. Tata Sons on Monday removed Cyrus Mistry as its Chairman, nearly four years after he took over the reins of the group.

Ousted as the chairman of Tata Sons on Monday, Cyrus Mistry levelled a series of allegations against the group in an email, including those related to fraudulent transactions, unethical practices and conflict of interest. Tata Sons countered his allegations saying the former chairman was fully empowered to lead the group and its companies but had “overwhelmingly” lost the confidence of board members. Refusing to get drawn into the nitty gritties, Tata Sons said it is beneath the dignity of company to engage in a public spat with regard to the several unfounded allegations appearing in his leaked confidential statement.

WATCH VIDEO: Following Cyrus Mistry’s Ouster, Tata Group To Shortlist Candidates For Next Chairman

 

Here is what happened:

Cyrus Mistry’s allegation: 

“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.”

Tata Sons counter:

“This is not a group of people who one would expect to act without exercising proper judgement in the best interests of the entities they sit on the boards of. 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.”

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

Cyrus Mistry’s allegation:

“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. 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.”

Tata Sons counter: 

The former chairman was fully empowered to lead the group and its companies but had “overwhelmingly” lost the confidence of board members. The correspondence makes unsubstantiated claims and malicious allegations, casting aspersions on the Tata group, the Tata Sons board and several Tata group companies and some respected individuals. These will be responded to in an appropriate manner.

ALSO READ: Tatas hit back; ‘Cyrus Mistry fully empowered to lead, lost confidence of Board’

Cyrus Mistry’s allegation:

“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.”

Tata Sons’ counter:

“Its board members have in the past stressed on the need to be more decisively focused on bringing down debt, sharpening focus on both the portfolio and capital efficiency.”

Cyrus Mistry’s allegation: Tata Nano

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.”

Tata Sons counter: 

“It will be beneath the dignity of Tata Sons to engage in a public spat with regard to the several unfounded allegations appearing in his leaked confidential statement.”

Cyrus Mistry’s allegation: 

“The telecom business 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,”

Tata Sons counter: 

“These allegations are not based on facts or the true state of affairs. It is convenient to put selective information in the public domain to defend one’s point of view…The Tata way is to not run away from problems, or constantly complain about them, but firmly deal with them and build a better tomorrow.”

Cyrus Mistry’s allegation:

“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”.

Tata Sons counter: 

“It is unforgivable that Mr. Mistry has attempted to besmirch the image of the group in the eyes of the employees. The strength of the group was not just confined to its value system and ethics in the Board room but to a very large extent by the adherence to the values by its 6 lakh plus employees “whose spirit and cooperation has built the group to where it is today.”