Mumbai: Controversy has erupted over the 15 November board meeting of Tata Global Beverages Ltd that removed Cyrus P Mistry as chairman.
The same day, Mistry had, in a statement, disputed the company’s version of events.
The Mistry camp now claims that the video recording of the meeting—one is required by law—wasn’t made available to Mistry by company secretary V. Madan, who eventually told him in an email on 21 November that the recording didn’t happen because of “systemic failure”. Mint has seen a copy of the mail.
Harish Bhat, who replaced Mistry as chairman according to the statement sent by the company to the stock exchanges on 15 November after the meeting, did not answer several calls made to his mobile phone.
In an email response, a spokesperson for Tata Global Beverages said, “Tata Global Beverages would like to confirm that the company conducts and has always conducted its board meetings in accordance with applicable law.”
In a notification to the stock exchanges on 15 November, TGBL said Mistry was replaced by Bhat as the chairman of the board “keeping in view the long-term interests and alignment of all the stakeholders and stability of the company.” It was backed by a majority vote, with seven out of 10 directors present at the board meeting voting in favour of the resolution, it said.
Mistry termed the statement illegal. “When the proposal to remove Mr Mistry was sought to be moved, it was ruled out by the chairman since it was not on the agenda. The meeting was conducted by Mr Mistry as chairman and was concluded. The statement made to stock exchanges today is therefore inaccurate and illegal,” said a 15 November statement from Mistry’s office.
Refuting Mistry’s version of events, one of the company’s non-executive directors made light of the absence of the recording.
S. Santhanakrishnan said Mistry’s removal was very much part of the agenda and listed under the head “any other item”. “If the person to be removed is the chairman of the board himself, one cannot make it a separate agenda. If done so, the chairman will never allow that to happen,” he added.
According to Santhanakrishnan, the matter of Mistry’s removal was taken up when the meeting was very much on. He also said that soon after the meeting, the company secretary realized that the recording hadn’t happened and informed the new chairman, Bhat. “Why would anyone in the company or the proposer of the resolution tamper (with the recording) when the resolution was passed by the board with a comfortable 7 - 3 majority?” he asked.
The Tata Global Beverages board includes six independent directors: Darius Pandole, V. Leeladhar, Mallika Srinivasan, Analjit Singh, Ranjana Kumar and Ireena Vittal.
While Singh attended the meeting via video conference, Vittal was absent.
None of these directors have publicly disputed the company’s version of the meeting.
But how serious is the absence of a recording?
Electronic record keeping of the board meeting is a requirement under the Secretarial Standards, (which came into effect from July 2015) if any director of the board is attending the meeting via video conferencing.
“Any penalty under securities law would only follow if the company hasn’t made adequate disclosures or if there is insider trading, which doesn’t seem to be the case in Tata Global,” said a person familiar with the standards.
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J.N. Gupta, co-founder and managing director at proxy advisory firm Stakeholder Empowerment Services (SES), said he “doesn’t find anything very serious” in this particular instance. It would have been serious had seven people participated through video conference and only one person was physically present, he said.
But there is an alternative view as well.
“The meeting is nullified if the audio video recording is not there. It is compulsory to have this recording,” said Chandubhai Mehta, managing partner of law firm Dhruve Liladhar and Co.
On 24 October, the board of Tata Sons Ltd abruptly removed Mistry as chairman of the holding company.
Since then, Mistry and Tata Sons have engaged in an almost daily war of words. The former has, through his associates, spoken of alleged corporate governance failures in some Tata companies and, in an email the day after he was fired, claimed he had been reduced to a “lame-duck” chairman because of interference by Tata Trusts, the largest shareholder in Tata Sons.
Tata Sons has countered with allegations of under-performance and mismanagement.