Tata Sons Ltd’s board had serious differences with Cyrus P. Mistry, its ousted chairman, over the fundraising plans of Tata Motors Ltd in 2015, according to the affidavit and annexure filed by Ratan Tata and Cyrus Mistry at the National Company Law Tribunal (NCLT).
The affidavits were filed in response to a suit filed by Cyrus Investments Pvt. Ltd and Sterling Investment Corp. Ltd, the Mistry family investment firms, alleging mismanagement and oppression of minority shareholders at Tata Sons, the group holding company.
In his affidavit, Ratan Tata alleged that Mistry didn’t keep the Tata Sons board informed about the details of the Rs7,500-crore Tata Motors rights issue. Tata Sons, as a principal shareholder and sole underwriter to the issue, was expected to pick up the unsubscribed portion of the sale. He said no directors, including the trusts’ nominated ones, had the opportunity to express their views on the matter.
“This, in my view, conflicted with the letter and spirit of the Articles of Association of Tata Sons which contemplate that all major issues of significance should come before the board of Tata Sons for deliberation so that all directors including the Trusts nominee directors who have an affirmative vote in relation to matters before board can effectively and in a meaningful way exercise their judgment," Tata said in the affidavit. Tata Trusts control two-thirds of Tata Sons.
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This was just one instance of Tata being concerned with the manner in which critical decisions were being taken by the operating companies under Cyrus Mistry’s chairmanship, shows a hand-written personal note sent by Tata to Mistry.
The note was filed as an annexure along with Mistry’s affidavit.
In his affidavit filed on 26 December, Mistry alleged that Ratan Tata and trustee Noshir Soonawala “would regularly go on to allege a breach of articles of association every time he wished to have his way".
Tata’s personal note to Mistry on 30 January 2015 said that “Mistry needs to accept" that in absence of a prospective agreed, long-term business plan for Tata Sons, “it would be difficult for the Trusts to give their consent as a principal shareholder."
Mistry’s response to the note said that he could not have shared further details as it would have violated insider trading norms. The ousted chairman also said that all relevant board papers where the discussions on fund requirements were captured from time to time were delivered to Tata regularly (in his capacity as chairman emeritus).
Moreover, the trust-nominated directors participated in a presentation made by each company on the extent of equity infusion and instruments, Mistry clarified, adding that he had asked C. Ramakrishnan, chief financial officer, and H.K. Sethna, company secretary at Tata Motors, to seek guidance from Soonawala on the equity issue and the type of instrument the company should be using and it was only after getting his views and suggestions that the proposal was taken to board of Tata Motors. Soonawala, in his subsequent response to the Mistry’s letter on 16 February 2015, said the meetings with Tata Motors’ Ramakrishnan and Sethna were brief and no specifics were discussed.
Mistry’s souring relationship with Ratan Tata and Tata Trusts led to the former’s ouster as chairman of Tata Sons on 24 October. Both sides have since then been engaged in a bitter feud. “Going by this account, it seems the acrimony between Tata Sons and Mistry was brewing for sometime. His ouster doesn’t surprise any more," said Shriram Subramanian, managing director and founder at InGovern Research, a proxy advisory firm. A Tata Sons spokesperson said he would not comment on the affidavits. Mistry’s office also declined to comment.