Tata Turmoil : Tata Sons initiates process to oust Cyrus Mistry and Nusli Wadia
Wadia has been an independent director of Tata Motors since December 22, 1998, and Tata Chemicals since June 26, 1981. He�s also the chairman of Bombay Dyeing and Britannia Industries. Wadia is said to have tried to split independent directors of Tata Steel on the question of support to Chairman Cyrus Mistry.
As a first step to divest Cyrus Mistry as chairman of Tata Motors, Tata Steel and Tata Chemicals, Tata Sons on Friday initiated a number of steps to remove him and Nusli Wadia from the boards of a number of group companies including Tata Motors, Tata Steel, and Tata Chemicals. Tata Sons is particularly cross with Wadia whom it sees as the man responsible for allegedly influencing independent directors on Tata Motors, Tata Steel and Tata Chemicals to back Mistry. Wadia had backed Mistry at the Tata Chemicals board meeting on Thursday.
Wadia has been an independent director of Tata Motors since December 22, 1998, and Tata Chemicals since June 26, 1981. He’s also the chairman of Bombay Dyeing and Britannia Industries.
Wadia is said to have tried to split independent directors of Tata Steel on the question of support to Chairman Cyrus Mistry. However, with backing from three independent directors, Tata Sons has secured a crucial victory in its battle against Mistry. The majority board members including the three independent directors opposed the move for a unanimous decision to support Mistry.
Such a motion to support Mistry, as in the case of Indian Hotels and Tata Chemicals, could not, therefore, be adopted and the meeting ended without consensus, say sources. OP Bhatt, former chairman of SBI, Mallika Srinivasan, wife of Tata Sons Director Venu Srinivasan, and Andrew M Robb voted in favor of Tata Sons, thwarting board member Nusli Wadia’s attempts to secure unanimous support for Mistry.
The development could be considered a setback for Mistry and a victory for Tata Sons as the latter goes about mustering shareholder support for ousting Mistry from the chairmanship of group companies. Support from independent directors may not save Mistry from being sacked as chairman if shareholders vote in support of Tata Sons. But it would give him a crucial boost when he makes his arguments to the shareholders.
In a number of statements issued by the group companies to stock exchanges, Tata Sons asked the companies to convene an Extraordinary General Meetings to pass resolutions for the removal of Mistry and Wadia as Directors of the Company under Section 169 of the Companies Act, 2013.
Tata Sons said the trust reposed in Mistry by appointing him Chairman four years ago “has been betrayed by his desire to seek to control main operating companies of the Tata group to the exclusion of Tata Sons and other Tata representatives.”
“It was a fair expectation of Tata Sons that Mistry would gracefully resign from the boards of other Tata companies on being replaced from the position of the Chairman of Tata Sons. This expectation was in line with convention, past practice as well as the Tata governance Guidelines that were approved and adopted by Tata Sons under the aegis of Mr. Mistry. However, his departure from these requirements and conduct since his replacement as Chairman of Tata Sons demonstrates his absolute disregard of long-standing Tata traditions, values and ethos,” Tata Sons said in a statement.
Sources close to the Mistry camp, however,reportedly said it was unrealistic on the part of Tatas to expect him to quit now after being ousted from the Chairmanship of Tata Sons “without any reason”. The sources said the fact that the Tatas subsequently ousted him from TCS without even a board resolution indicates that matters have gone beyond traditions and values of the Tata group.
The boardroom battle between the two sides has split the group. Executives who back Mistry’s stand are being eased out, while old Tata group loyalists are seen making attempts to wrest control.
Industry experts, though, believe that Mistry cannot be removed as Chairman of any of the listed companies of Tata Group unless the Articles of Association of that company transfer that right on Tata Sons. The total equity holding by Tata Sons in the group company will also determine whether Mistry remains on the board of these entities.
Proxy advisory firm InGovern Research Services said in a statement “Of the seven listed Tata companies where Mistry is a Director, TCS has the highest promoter holding at 73.33 per cent. The other six companies have a promoter holding of between 30 and 39 percent. It is to be seen as to what happens with all the other companies where Tata Sons has a holding below 40 percent. In these companies, the vote of institutional investors will be decisive.”