The Tata-Mistry battle is expected to spill over to various listed Tata companies which are scheduled to meet in the next few days to approve second quarter results. The board meeting of Indian Hotels which will be held on Friday will be a crucial one for the Tatas and Cyrus Mistry, who was removed as the chairman of Tata Sons, the holding company of the group, on October 24.
While Mistry has not given any indication that he will step down as the chairman of Indian Hotels Company — which run the Taj group of hotels — the Tatas have not disclosed their strategy on retaining or removing Mistry from the chairmanship of various listed group companies, including Indian Hotels. Sources said Mistry will continue to discharge his fiduciary responsibility as long as he remains the chairman.
Interestingly, Shapoor Mistry, elder brother of Cyrus Mistry and also chairman of the Shapoorji Pallonji group, is also on the board of Indian Hotels. Other directors include former HUL chairman KB Dadiseth, HDFC chairman Deepak Parekh, Nadir Godrej, Ireena Vittal, Gautam Banerjee and Vibha Paul Rishi. Tata group’s former HR head, NS Rajan had resigned as Indian Hotels Director last week.
According to corporate lawyers, it will be a tough proposition to remove Cyrus Mistry as director or chairman of a listed company — which follows listing norms and regulated by stock exchanges and Sebi — if he has been elected by shareholders.
However, if the board has elected him chairman, the board can remove him through a resolution. “The directors can move a no-confidence resolution to remove a chairman if he was elected as chairman by the board. The resolution can be moved if the chair permits. If the chairman doesn’t permit, there will be fight, voting etc,” said JN Gupta, MD, Stakeholders Empowerment Services. “If shareholders have elected a chairman, only they can remove him from the post. Removal of a chairman, who was elected by the board, from the post, can be done at any board meeting,” Gupta said.
“Who will move the resolution? They are all heavyweights and not necessarily followers of any particular side. The directors should raise questions about the allegations made by Mistry,” said an institutional source. Institutions have made it clear that listed companies should follow required corporate governance norms and legal processes.
A day after he was removed as Tata Sons chairman, Mistry had sent a letter to Tata Sons director, levelling allegations, among other things, that “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 entire its entire networth over the past three years. This impairs its ability to pay dividends.”
Cyrus Mistry is expected to chair the board meeting of Tata Chemicals on November 10. Apart from Mistry who is the chairman, the Tata Chemicals board includes Nusli Wadia, who is considered as a close confidant of Ratan Tata, Nasser Munjee and R Mukundan.
On October 25, after his removal as Tata Sons Chairman, Mistry had chaired a board meeting of Tata Global Beverages held at Bombay House. This board meeting discussed about the various plans of the company and Mistry’s resignation never figured in the board meeting.
In fact, Mistry is the Chairman of top Tata group firms, including Tata Steel, TCS and Tata Motors. Three members of the now dissolved Group Executive Council — Madhu Kannan, Nirmalya Kumar and NS Rajan — brought in by Mistry have quit the group. The Pallonji Mistry group holds close to 18 per cent stake in Tata Sons while 66 per cent is held by Tata Trusts and the balance by various Tata companies.
With Ratan Tata making it clear that Mistry’s removal was for the “future success” of the group, Tata is unlikely to yield to pressure at this stage. In a letter to employees last week, Tata had said, “the decision to change the leadership of Tata Sons was a well-considered and serious one for its board members. This difficult decision, made after careful and thoughtful deliberation, is one the board believes was absolutely necessary for the future success of the Tata Group.”