The Tata-Mistry spat has entered a new divisive phase, drawing clear lines between those who support Ratan Tata and those backing Cyrus P. Mistry
Tata Sons Ltd has moved resolutions to eject Cyrus Mistry and Nusli Wadia as directors of Tata Steel Ltd, Tata Chemicals Ltd and Tata Motors Ltd, as the spat following Mistry’s ouster as chairman of the group turns more bitter.
The three operating companies announced the resolutions brought by the group holding company in separate filings to the stock exchanges on Friday.
Tata Sons controls 26.51% of Tata Motors, 19.35% of Tata Chemicals and 29.75% of Tata Steel.
The development followed Tata Chemicals’ board meeting on Thursday 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.
“It is an unprecedented move by the Tatas," said Amit Tandon, managing director and founder at Institutional Investor Advisory Services, a proxy advisory firm, alluding to the attempt to eject Wadia. “Usually, companies do not remove the independent directors unless there are compelling reasons to do so," he added.
Besides Wadia, the seven-member board of Tata Chemicals has three other independent directors—Y. S. P. Thorat, Vibha Paul Rishi and Nasser Munjee.
“It (resolution) is in the interest of all the stakeholders. Discord between the promoter and directors of the operating companies is a recipe for disaster," a Tata group official said on condition of anonymity, before the announcement to the stock exchanges.
The move signals that the spat following Mistry’s 24 October removal as Tata Sons chairman has entered a new, divisive phase, drawing clear lines between those supporting Ratan Tata, who has become interim chairman, and those backing Mistry. On Thursday, Tata Sons removed Mistry as chairman of Tata Consultancy Services Ltd, in which it has a majority stake.
In a separate development, Bhaskar Bhat, a non-executive, non-independent director on the board of Tata Chemicals , resigned. In a letter to Mistry, Bhat said the content in the statement by independent directors ‘dilutes’ his views expressed in the board meeting.
“The contents as well as the spirit of the statement completely dilutes the views I expressed at the Board meeting today especially regarding the threat the company faces on account of loss of confidence of the promoter Tata Sons in the chairman of Tata Chemicals Limited. Several important issues of discomfort I expressed seem to have been totally ignored. I therefore hereby tender my resignation as director of Tata Chemicals, with immediate effect," Bhat said in his letter.
Wadia, chairman of Bombay Dyeing & Manufacturing Co. Ltd and Britannia Industries Ltd, has been an independent director of Tata Chemicals since 26 June 1981, Tata Steel since 12 August 2005 and Tata Motors since 22 December 1998.
“After the removal of the chairman, it makes sense to reconstitute those boards, it has to be seen how the articles of association of various companies permit it. If the current dissonance continues, it is more damaging," said the Tata group official cited earlier.
Shriram Subramanian, managing director at InGovern Research, a proxy advisory firm, expects most independent directors on the boards of companies where Tata Sons moves a resolution seeking Mistry’s removal to resign if he is voted out.
“If Mistry loses in the EGM (extraordinary general meeting), the position of the directors becomes very untenable," said Subramanian.
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