Ratan Tata, Cyrus Mistry seem set for long legal battle

The removal has been followed by bitter outbursts from the ousted chairman, and the now interim chairman Ratan Tata and team have moved to file caveats.

Written by Kanishka Singh | New Delhi | Updated: October 26, 2016 8:04 pm
Cyrus Mistry, Cyrus mistry mail, Cyrus Mistry tata group, Cyrus Mistry tata sons, chairman Cyrus Mistry, Cyrus Mistry email, india news 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.

Cyrus Pallonji Mistry’s removal as chairman of the Tata group of companies has chartered into the legal sphere and is now set to turn into an extended legal battle. The Tata group is seen as an example of doing business in the Indian corporate world. Cyrus Mistry, son of Pallonji Mistry who is the owner of Shapoorji Pallonji group and the biggest stakeholder in the Tata group, was appointed to the top position in 2012.

WATCH VIDEO: Cyrus Mistry’s Career Timeline

 

The removal has been followed by bitter outbursts from the ousted chairman, and the now interim chairman Ratan Tata and team have moved to file caveats in Bombay High Court, Delhi High Court and the National Company Law Tribunal as a measure to guard them from any legal action that Mistry may initiate. Mistry has not announced any legal action yet and hasn’t filed any caveats either.

Apparently, Mistry was not informed of the meeting that decided his ouster and all developments took place in a secretive manner. The Tata group and Mistry have not really given any clear picture on the reasons for his ouster but Mistry has termed his removal and the board’s conduct in this matter as inappropriate and illegal according to the group’s article of association. However, Tata group has argued that changed in the AoA has allowed them to take these actions in a legal way.

Mistry was appointed deputy chairman of the group in 2011 and then promoted to chairman the next year. Relations were seen as amicable between Mistry and Tata till the vitriol of recent days emerged. Tata group is understood to have considered hiring top lawyers in the country like P Chidambaram, Kapil Sibal, Abhishek Manu Singhvi, Harish Salve and others in the matter.

Meanwhile, Ratan Tata convened a meeting of 25 CEOs at the Bombay House in Mumbai which is the headquarters of the Tata group. In the meeting, Tata told the CEOs to forget about who is leading at the top and instead focus on their market position vis-a-vis their competition. He urged the CEOs to not look at their past position to judge the current. Tata stressed that the CEOs must keep a weather eye out for profitability in the businesses but at the same time focus on giving proper dividends and returns to shareholders.

The over a century old Tata group is now a $103 billion conglomerate. While most of their businesses are industry leaders, some have suffered massively in the recent years during the tenures of both Ratan Tata and Cyrus Mistry. Significantly, Mistry inherited an ailing Tata Steel, Tata Chemicals, Tata Power and Tata Teleservices. Tata group’s market capitalisation increased from Rs 4.5 lakh crore when he took over in 2012 to Rs 8.6 lakh crore at present.

Mistry had effected several changes in the business practices due to which capital expenditure increased but returns to shareholders decreased. He replaced trusted hands of Ratan Tata and his proposed sale of Tata Steel port plant in the UK was seen as harming the goodwill earned by Tata abroad. The extended dispute with Docomo group proved to be one of the nails in the coffin. Tata had to cough up $1.2 billion in arbitration to the Japanese group.

Tata will now serve as the interim chairman of the group with four months to find a replacement. Cyrus has termed his removal as unprecedented and a first in the annals of the corporate world and has been left miffed with the manner in which he was removed.