Mumbai: Eleven days after Tata Sons sought a special resolution to remove Nusli Wadia, an independent director and an old Tata associate, from the boards of three operating companies, Wadia has shot back putting Tata Sons on a two-day notice.
Among other things, Wadia, in a five-page letter addressed to the board of directors of Tata Sons on 21 November, said, “...that as an independent director his fiduciary duty is towards Tata Steel Ltd and not an undefined Tata group or Tata companies.” Wadia’s communique once again brings the spotlight on the role of independent directors in a company.
Interestingly, while the letter was addressed to Cyrus P. Mistry, the ousted chairman of Tata Sons, among other board members, it didn’t include Ratan Tata, interim chairman, Tata Sons. It also excludes Ralph Speth, chief executive of Jaguar Land Rover Automotive Plc, and N. Chandrasekaran, managing director and chief executive at Tata Consultancy Services Ltd.
Wadia referred the move to seek his expulsion as “false, defamatory, baseless and libellous”, pointing out that the allegations have been made with an intent to harm his reputation. In his missive, he called upon the company to prove and substantiate the charges levelled against him with documentary evidence. He warned that should Tata Sons fail to withdraw the notice in the next two days, he will initiate criminal and civil proceedings.
The war of words through letters and statements has marked the month-old spat between Tata and Mistry. However, it’s the first time that a third party—an independent director—has written such a strongly worded letter to the board of the holding company and threatened a legal recourse.
“I hereby call upon you to withdraw your special notice immediately or prove beyond doubt, the statements made therein, within two days of this communication,” he wrote.
The special notice made a requisition to the board of directors of Tata Steel Ltd for convening a shareholders’ meeting—the agenda of which included removal of Nusli Wadia as a board of director. Among other things, the notice accused Wadia of acting in “concert with Cyrus P Mistry” and acting as an “interested party” working against the interest of the Tata Group.
Questioning Wadia’s role as an independence director, Tata Sons accused him of “galvanising independent directors and acting prejudicially”. It said Wadia’s actions have put the future of the company in grave jeopardy even as it has adversely impacted the morale of the employees. The principal shareholders therefore “have lost confidence in him”.
Wadia, in his letter, warned that if Tata Sons failed to withdraw the special notice, he will assume that such statements have been made deliberately and maliciously “to defame, to browbeat” him to “irreparably damage” his reputation, without any evidence or proof, with the sole intent of publicly causing injury to him.
Wadia pointed out that he had served on the board of Tata Steel Ltd as an independent director since 1979 and had always acted with total independence of mind, long before it became a requirement to do so under any law or regulation in India.
Invoking his several decades-old association with the Tata family, Wadia pointed out that his close association with J.R.D. Tata goes back to several decades since 1970.
He termed J.R.D. Tata as his “mentor and Godfather” but he was surprised that one of the first acts of the board of Tata Sons, after Ratan Tata became its interim chairman, was to move a resolution seeking Wadia’s removal as an independent director based on “false, defamatory, absolutely baseless and libellous allegations made with intent to harm my reputation”.
Tata Sons’ move to seek a resolution for Wadia was prompted by the Tata Chemicals’ board meeting on 10 November at which Wadia and other independent directors backed Mistry as chairman of the board. The directors said they took into consideration his performance for the past couple of years in backing him. Justifying the move, a Tata group official had told that the resolution was in the interest of all the stakeholders, pointing out that a discord between the promoter and directors of the operating companies was a recipe for disaster.
In a 16 November note, proxy advisory firm IiAS wrote that while promoters are well within their legal rights to seek the removal of a director, Tatas’ move is an unprecedented one. Such moves, it said, are typically initiated by shareholders following alleged fraud or mismanagement by the said director, like in the recent cases of S. Kumars Nationwide and Ricoh India. In Wadia’s case, none of the above mentioned scenarios are applicable. Tata Sons holds more than 10% stake in each of the three companies.