BackTata: 1, Mistry: 0, but this fight has just begun
Tata Industries shareholders kick off group firms' EGMs by voting to remove Cyrus Mistry
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Mumbai: Shareholders of Tata Industries Ltd on Monday removed Cyrus Mistry as director, in the first of a series of extraordinary general meetings (EGMs) of shareholders of Tata operating companies called for this purpose.
Shareholders of Tata Consultancy Services Ltd (TCS), the most valuable among the group’s companies, will meet on Tuesday. Over the next few weeks, the boards of other key Tata companies are scheduled to meet: Indian Hotels Co. Ltd on 20 December; Tata Steel Ltd on 21 December; Tata Motors Ltd on 22 December; Tata Chemicals Ltd on 23 December; and Tata Power Co. Ltd on 26 December.
ALSO READ | Cyrus Mistry to face TCS shareholders’ vote today
The end of the shareholder meetings will mark the completion of the first stage of the fight between Mistry, who was removed as chairman of group holding firm Tata Sons Ltd on 24 October in a boardroom putsch orchestrated by the Tata Trusts, the largest shareholder in the company, and headed by former chairman Ratan Tata, and Tata Sons.
Since then, the two sides have been locked in a battle. Tata Sons has accused Mistry of underperformance and doing things that weren’t in keeping with the group’s reputation for integrity. In turn, Mistry has highlighted several alleged lapses in corporate governance at group firms and also claimed that he was trying to turn around the fortunes of the group’s “hotspots", as he referred to some of the debt-heavy Tata companies.
With financial institutions such as the Life Insurance Corp. of India that hold stake in some of these companies deciding to abstain, as reported by Mint on 3 December, Tata Sons will likely be able to remove Mistry from the boards of even those operating companies where it does not enjoy a majority. That includes Tata Motors and Tata Steel.
ALSO READ | Mistry removed as Tata Industries director in shareholder vote
However, Mistry has already sought intervention by regulators and the government and could seek legal recourse if all else fails. A corporate lawyer, who asked not to be identified, said that Mistry had enough grounds to take his grievances to a court or a regulator such as the Securities and Exchange Board of India. BSE and the National Stock Exchange have already sought an audit of Tata companies.
Mistry’s objectives, according to a person close to him, are to ensure that the corporate governance issues he has raised (and which he says he was trying to address) are resolved, reduce the almost complete power Tata Trusts has over the management of Tata Sons, and protect his family’s 18.5% stake in Tata Sons.
After 24 October, Tata Sons said that it expected Mistry to quit as chairman of the operating companies—a position it claimed he enjoyed only because he was chairman of the holding company.
When Mistry dug in his heels, Tata Sons engineered his exit through so-called circular resolutions (a mechanism that allows directors of a company to pass a resolution in between board meetings; it is used for non-contentious and routine matters) or voting by the board.
Cyrus Mistry-Ratan Tata spat: A look at how the events unfolded
In one case—Tata Global Beverages—Tata Sons claimed the board had voted Mistry out as chairman, a version disputed by the latter, who sought a copy of the video recording of the meeting. After it turned out that the video recording wasn’t made because of a technical glitch, the board of Tata Global moved a circular resolution and voted Mistry out as chairman.
The EGMs have been called to remove him as director. According to an expert in shareholder law, Tata’s efforts to remove Mistry as chairman of key operating firms before the EGMs may be because the chairman usually has a say in controlling these meetings. This person asked not to be identified.
Tata has ousted Mistry as chairman of TCS, Tata Global Beverages and Tata Steel. He continues to be the chairman of Tata Motors, Tata Chemicals, Tata Power and Indian Hotels. With his removal as director of Tata Industries, Mistry also ceased to be the firm’s chairman.
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