Mumbai: The Tata group, in an affidavit filed to the National Company Law Tribunal (NCLT) board, strongly refuted charges levelled by Cyrus P. Mistry, the ousted chairman of Tata Sons, and said Mistry did a poor job of turning around companies such as Tata Steel Ltd and Tata Motors Ltd, resulting in a drop in dividends to the Tata Trusts, The Economic Times reported on Monday, citing the affidavit.
It also said Mistry did not pay any heed to Ratan Tata’s requests to keep his family business at a distance to avoid conflict of interests.
The affidavit is a response to the petition filed by Mistry on 20 December. In his petition Mistry alleged mismanagement and oppression of minority shareholders of Tata Sons and seeking the ouster of the current management of Tata Sons and Tata Trusts.
Ratan Tata, in a handwritten letter dated 24 September 2013, seemed alarmed by the conflict of interests between Mistry’s family business and Mistry’s position as chairman and, therefore, prodded Mistry to set up a so called “blind Trust” that will disassociate the latter from his Tata shareholding, and also not to have any transaction of business between Shapoorji Pallonji Group and Tata Group as long as Mistry was its chairman.
Blind Trust is a popular concept abroad when individuals are keen to avoid any conflicts with another entity their firm has a relationship with. It allows the owner of the stake to relinquish the control of the company during the period when he has other responsibilities. Tata preferred handwritten notes in his correspondence with Mistry, reflecting his desire to keep differences strictly confidential, between him and his then successor.
Even as Mistry was removed as the chairman of the $103 billion group only on 24 October 2016, the differences between Mistry and the then chairman emeritus Ratan Tata had surfaced as early as 2013, according to the 37-page affidavit.
Responding to the accusation that he has a minor stake in Tata Sons and, therefore, it is the real stakeholders, including Mistry’s investment firms, which are suffering because of the losses incurred by Tata Steel Europe, Tata called the insinuation distressing. It is the trusts which hold a majority stake far exceeding that of Mistry’s firms. “Such inconsiderate allegations effectively degrade my lifelong contribution to the success story of the Tata Group, which began with Tata.”
The affidavit also provided a detailed account of why the board lost confidence in Mistry’s ability to “steer and lead”. Tata said Mistry did little to resurrect companies such as Tata Motors. Further, dividends received by Tata Trusts declined.
He said it was with a “heavy heart” that he came to terms with the fact that the group had “faltered” in their judgement when they chose Mistry as chairman. It stated that Mistry has failed to “graciously accept” the decision of the very same board that appointed him as chairman.
Among other things the response to Mistry’s petition provided elaborate reasons of why the board lost confidence in Mistry’s ability to “steer and lead”. Tata alleged that Mistry did little to resurrect companies such as Tata Motors. Further, dividends received by Tata Trusts declined.
Following a bitter battle which started from the boardrooms and has now spilled into courtrooms, Tata Sons, the holding company of India’s largest conglomerate, has called for an extraordinary general meeting on 6 February to eject Mistry from the board of the closely held firm.
Mistry, whose family owns 18.5% of Tata Sons, resigned as director from all Tata Group companies and filed a case with the NCLT alleging that trustees led by interim chairman Ratan Tata were causing a complete breakdown of corporate governance at Tata Sons. Tata Trusts—a philanthropic group of bodies endowed by the Tata family—own two-thirds of the firm.