Mistry’s comments on proposal of TCS sale to IBM incorrect: FC Kohli

Cyrus Mistry’s comments that Ratan Tata proposed a sale of TCS to IBM at some ‘unspecified point in time, are not correct, says former TCS chairman FC Kohli

Cyrus Mistry’s office said that Ratan Tata had approached J.R.D. Tata, then chairman of Tata Sons, with a proposal from IBM to buy out TCS. Photo: PTI
Cyrus Mistry’s office said that Ratan Tata had approached J.R.D. Tata, then chairman of Tata Sons, with a proposal from IBM to buy out TCS. Photo: PTI

Mumbai: The Tata Group Wednesday pulled out the big guns from its old guard as it sought to puncture ousted chairman Cyrus Mistry’s allegations on Tuesday against interim chairman Ratan Tata.

In the first of two statements, F.C. Kohli, former chairman of Tata Consultancy Services Ltd (TCS), disputed Mistry’s claim that Tata had once proposed selling the company to its erstwhile partner International Business Machines Corp. (IBM). In the second, B. Muthuraman, former vice-chairman and managing director of Tata Steel Ltd, refuted the charge that the company purchased Corus Group Plc. at a steep price.

On Tuesday, Mistry’s office said Ratan Tata, who was then heading a joint venture between Tata Industries Ltd and IBM, had approached J.R.D. Tata, then chairman of Tata Sons, with a proposal from IBM to buy out TCS. This, it said, happened when Kohli, considered the founding father of the Indian software industry and then TCS boss, was unwell. J.R.D. Tata refused to sell TCS after Kohli assured him the company had a bright future, the statement said. The statement didn’t specify the year in which the proposal was made or how Mistry had access to this information.

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On Wednesday, TCS issued a statement on behalf of Kohli, which said “Cyrus Mistry’s comments regarding the sale of TCS to IBM at some “unspecified point in time” are not correct.”

In his statement, Kohli, now 93, said he was actively involved in the decision to bring IBM to India. A joint venture for hardware manufacturing and support in India, Tata IBM, was set up in 1991-92. This JV was undertaken to promote a computer hardware industry in India which was non-existent at that time. “I would like to reiterate that at no point at that time was there ever an intention of the Tata Group to sell TCS to IBM,” he said.

With reference to the timeline of the entire episode, Kohli clarified that his “heart by-pass surgery” took place in 1984. “Mr J.R.D. Tata was interested in my health and progress after the surgery and he established contact with my surgeon at Houston. He also wanted to know when I would be well enough to return to India. He wanted to discuss Burroughs proposal for software work in India under Tata Burroughs,which might affect TCS’s business,” he said.

In response, a response from Mistry’s office said the ousted chairman had the greatest respect for Kohli and did not wish to join issue with him. “The statement Mr Mistry made was based on information from sources who were close to JRD Tata who informed him that it was Ratan Tata’s intention, and not the group’s intention, to sell TCS,” the statement said.

Separately, Tata Steel issued a statement from its former boss Muthuraman: “I am surprised and very sad to see the speculative and biased views being fed in the media regarding the acquisition of Corus nearly a decade back in early 2007,” he said, adding it was part of the company’s long-term strategy to grow inorganically and was thought through.

On Tuesday, Mistry’s office had alleged that the decision to acquire Corus for over $12 billion, when only a year earlier it was available at less than half that price, was based on “one man’s ego” and against reservations of some board members and senior executives.

Defending Mistry’s take on Corus, the response from his office said the ousted chairman did not say that the ultimate decision was not unanimous, but there were differences and reservations.

Muthuraman’s statement added that Tata Steel’s strategy at that point was to focus on entering new markets through acquisitions, improving its technology capability and developing premium products. He said the Corus buy was justified by its average operating profit of one billion pounds in the first two years of acquisition.

“The fact that Corus was available for purchase at half the price in the recent past is undisputed,” the statement from Mistry’s office countered.

“With the benefit of hindsight, anyone can say anything, this will not resolve any issue” said Amit Tandon, managing director at proxy advisory firm IiAs, adding that it’s time that both sides sit down and resolve structural issues instead of engaging in a war of words.

Meanwhile, in a filing to stock exchanges on Wednesday, Tata Motors Ltd said it has called for shareholders’ meet on 22 December to seek the removal of Mistry and Nusli Wadia as directors.

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