Mumbai: “Keeping in view the long-term interests and alignment of all the stakeholders and stability of the company, the board of directors resolved to replace Cyrus Mistry as chairman of the company with majority vote, with 7 out of the 10 directors present at the board meeting voting in favour of the resolution,” Tata Global Beverages said in a statement to the exchanges.
Cyrus Mistry continues as a director on Tata Global Beverages’s board.
This is the first time a majority of the directors of a Tata group company have come together to make such a decision after Tata Sons Ltd, the group holding firm, ousted Mistry as its chairman on 24 October.
A majority of the board voted to replace Mistry not because of his performance but considering the long-term interests of the company, said S.Santhanakrishnan, director on the Tata Global Beverages board. “Tata (Sons) has been our parent. It’s got nothing to do with Mistry’s performance but with the fact that there is hostility with the parent and this would impact us in the long-term.”
After the boards of some group firms like Tata Chemicals and Indian Hotels Co. Ltd supported Mistry’s continuance as chairman, Tata Sons called for a shareholder meeting to eject him as a director. It also replaced Mistry as the chairman at Tata Consultancy Services Ltd, using its powers under the software services firm’s articles of association.
“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 statement from Mistry’s office.
A person close to Mistry said the ousted chairman was going to write to the company secretary that a misleading statement had been issued to the stock exchanges.
Experts are divided about the legality of the move by the Tata Global Beverages board to go ahead with the resolution.
“Unless articles of association of the company specifically provide veto rights, corporate and securities laws do not provide a veto right to any chairperson or MD when the majority of directors wish to deliberate on any other item,” said Sumit Agrawal, founder at Suvan Law Advisors.
On the other hand, the board of the company might have fallen short on the procedural aspects laid down by the Institute of Company Secretaries of India (ICSI), said Tejesh Chitlangi, partner at law firm, IC Legal.
“If an additional agenda item (not disclosed earlier) is to be taken up in the board meeting it would require a consent of the chairperson. The secretarial standards are silent in case the chairperson is conflicted,” he said.
The Tata Global Beverages board includes six independent directors: Darius Pandole, V. Leeladhar, Mallika Srinivasan, Analjit Singh, Ranjana Kumar and Ireena Vittal (who said she didn’t attend the meeting).
Mistry’s statement said that Singh and Pandole opposed the resolution to remove him.
Jayshree P. Upadhyay and Gopika Gopakumar contributed to this story.