Mumbai: A day after Cyrus Mistry said he would take his battle with Tata Sons—and the Tata Trusts that control the Tata holding firm—to another forum, he did just that.
On Tuesday, investment firms controlled by his family moved the National Company Law Tribunal to protect their interests against mismanagement and oppression of minority shareholders at Tata Sons. NCLT Mumbai will hear the petition on 22 December .
Sterling Investment Pvt. Corp. Ltd and Cyrus Investments Pvt. Ltd, which together hold a little more than 18% in Tata Sons, have moved a petition under clause 241 and 242 of the Companies Act, 2013.
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Tata Sons interim chairman Ratan Tata, the firm’s board of directors, Sir Ratan Tata Trust, Sir Dorabji Tata Trust and their trustees are among the 23 respondents named.
Clause 241 allows minority shareholders to complain that the affairs of a company are not being managed properly. Such shareholders can also complain if an alteration in the board of directors will affect the management of the company. Clause 242 gives the tribunal wide-ranging powers, from regulating the conduct of affairs of the company to the removal of directors.
“The petition seeks intervention to address a governance breakdown in Tata Sons and (help) regain its lost ethical ground,” said a person familiar with the matter who asked not to be identified. “Abuse of the articles of association by some trustees will also be part of adjudication. Some imprudent business decisions and actions that lacked probity will also come under scrutiny.”
On Monday, after stepping down from the boards of the group’s listed firms ahead of shareholder meetings called to oust him, Mistry had said he would take the battle to a larger platform. He said that the endgame for him was “governance reform” at the group.
The NCLT petition is likely the first of such interventions as Mistry seeks not only governance reform but also to protect his family’s investments. Since 24 October, when Mistry was replaced as chair of Tata Sons, Tata firm’s stocks have lost a collective Rs80,780 crore, or about 10%, of market value.
The petition, which has been reviewed by Mint, claims the article of associations of Tata Sons, whose aim was to have a governance framework to protect the firm’s interests, have been converted into a regime enabling the control of Tata Sons by Ratan Tata and Noshir Soonawala, trustees of the Tata Trusts.
The petition further alleges that serious damage to the Tata brand has been caused by the conduct of Ratan Tata and Tata Trust trustees since 24 October, jeopardizing the group’s goodwill and reputation, both prime business assets of Tata Sons.
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The petition talked about friends of Ratan Tata (it named Lord Kumar Bhattacharya) being able to commit serious investment decisions on behalf of Tata Sons.
It alleged that certain loss-making and value-eroding investments made under Ratan Tata were persisted with and alleged that the interim chairman ran Tata Sons like a proprietorship. It added that Tata Sons’s directors failed in discharging their fiduciary obligations and failed the test of fairness and probity.
The petition further added that while the removal of Mistry (who has also been named as a respondent) was wholly illegal and against the interests of Tata Sons, it was not seeking his reinstatement.
At various instances in the seven weeks since Mistry was ousted as chairman of Tata Sons, he and Nusli Wadia (another director whom the holding company has sought to remove from the boards of three operating firms) have alleged corporate governance violations, hinted at possible breach of insider-trading regulators, irregular processes in board meetings and non-disclosures or misleading disclosures to stock exchanges by various Tata companies.
“Tata Sons is in consultation with its lawyers and will contest the allegations . Tata Sons reiterates that it has followed the highest standards of corporate governance in its operations and views the petition as an unfortunate outcome of the situation arising from Mr. Mistry’s complete disregard of the ethos of the Tata Group and Jamsetji Tata,” Tata Sons said in an emailed statement.
“Mr. Mistry was the Chairman of Tata Sons for almost 4 years and it is surprising that he is now making allegations on activities of Tata Sons after doing little to address them, in his tenure both as a Director (since 2006) and a Chairman since 2012,” it added.