Cyrus Mistry ouster: Tata Global Beverages in bid to ring-fence itself
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Mumbai: Tata Global Beverages Ltd (TGBL) on Friday passed a circular resolution to remove Cyrus P. Mistry as chairman, even though the board had already voted him out on 15 November.
At that time, Mistry had called the move illegal as it was not part of the board’s agenda. Tata Global Beverages had justified it by saying the removal was well within legal framework and informed the stock exchanges as well.
Lawyers and proxy advisers said the resolution is an act of ring-fencing by the Tatas to avoid any legal complications later. Tata Global Beverages might also have been prompted to float such a resolution after the Mistry camp claimed that the video recording of the 15 November meeting—one is required by law—wasn’t made available to the ousted chairman.
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“Since the recording is not available, this is probably being done to cure the defect which may be a subject matter of challenge,” said Anand Desai, managing partner with law firm DSK Legal.
An email sent to the Tata Global Beverages spokesperson on Sunday remained unanswered. Harish Bhat, chairman of TGBL, did not respond to text messages and calls on his mobile phone.
“The resolution is being passed for abundant caution, without prejudice to legality and validity,” said the six-page notice sent to all 11 board members (including Mistry). Mint has a seen a copy of the circular resolution.
The notice also said that the company is in receipt of a communication from Mistry who has put forth “a baseless allegation of procedural anomalies”.
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Mistry had on Friday written an email challenging the legality and genuineness of the 15 November meeting in the absence of a video recording to validate it after he was told by Tata Global Beverages’s company secretary in a 21 November email on that the recording didn’t happen because of “systemic failure”.
Electronic record-keeping of a board meeting is a requirement under the Secretarial Standards, (which came into effect July 2015) if any director of the board is attending the meeting via video conferencing. “The fact that they (Tata Global Beverages) feel the need to follow an alternative method of making sure shows that they were not confident of what they did in the first place,” said Anuradha Salhotra, partner at New Delhi-based law firm Lall, Lahiri and Salhotra.
Tata Global Beverages is the second company after Tata Steel Ltd to move a circular resolution to remove Mistry as chairman.
Such resolutions are passed in between the board meetings to seek the consent of board members. But unlike Tata Steel, Tata Global Beverages will not notify the stock exchanges about the resolution as the firm has already notified once on 15 November, said S. Santhanakrishnan, non-executive, non-independent board member of the coffee and tea company.
“The circular resolution is further evidence, if any is needed, of the legality of certain decisions of the board meeting of 15 November that Mistry has already questioned,” said a person close to Mistry. “It is seriously a point of anxiety for the Tatas.”
Santhanakrishnan, however, defended the 15 November board meeting and said that the circular was passed only to “reaffirm and confirm”, just in case Mistry goes to court challenging the non-recording and validity of the meet. “If seven out of 10 directors vote in favour, are you going to take away the resolution’s majority power for a technical reason?” asked Santhanakrishnan. “For a technical resolution, you can’t disqualify everything.”
The circular resolution too was passed by the same vote count, said two people with direct knowledge, including Santhanakrishnan.
The Tata Global Beverages board has six independent directors: Darius Pandole, V. Leeladhar, Mallika Srinivasan, Analjit Singh, Ranjana Kumar and Ireena Vittal.
Pandole did not respond to phone calls and text messages, while Leeladhar, Srinivasan, and Singh couldn’t be reached. Kumar and Vittal declined to comment.
Allegations and counter allegations have swirled ever since Mistry’s abrupt ouster as chairman of Tata Sons, the holding firm of the salt-to-software conglomerate. Both groups are bracing for the fight to finish at the upcoming extraordinary general meetings at group companies which Tata Sons has called to remove Mistry as a director.