Continuing the arguments on alleged instances of mismanagement at Tata Sons, a senior counsel representing Cyrus Mistry’s companies — Cyrus Investments and Sterling Investments Co — presented evidence on Air Asia India before the Mumbai bench of National Company Law Tribunal (NCLT). Air Asia India is an equal joint venture between Tata Sons and Tony Fernandes-led Air Asia Investment, with Tata Sons holding 49% stake in the company and the other 49% held by Air Asia Investment Ltd. The remaining 2% is held by two directors on the board of Air Asia India. R Venkataramanan holds 1.5% stake and S Ramadorai holds 0.5%.
Arguing on the matter, Mistry’s counsel C Aryama Sundaram alleged that Bharat Vasani, nominee-director of Tata Sons on the Air Asia India board, who was also the Tata group legal counsel, through an email complained to Mistry that the directors of Air Asia India, including R Venkataramanan, were approving related party transactions without reviewing any details or verifying the commercial terms. “Air Asia India, a Tata group company, has been a cause of serious oppression of and prejudice to the interests of shareholders of Tata Sons,” Sundaram told the bench hearing the matter. He said, Vasani “sounded repeated warnings about the goings-on in Air Asia India, and these evidences show the rampant and gross governance failures”.
He alleged that the Air Asia India board, which included R Venkataramanan, the managing trustee of Tata Trusts, did not pay heed to these warnings and took no steps to correct the same. “In fact, Venkataramanan, who also has personal shareholding in Air Asia India, interfered with the interventions that R-1 ought to have made in Air Asia India…the board of R-1 contemplated even shutting down Air Asia India to protect R-1 from reputational and monetary damage. All decisions taken at R-1 were under the advice of R-2, who was actively involved in Air Asia India, including attending its board meetings as a special invitee,” Sundaram argued.
R-1 is Tata Sons and R-2 is Ratan Tata.
Citing a few emails from Vasani, Sundaram said in one particular mail dated May 2015, Vasani wrote to Cyrus Mistry and other executives of Tata Sons, where he said that no due diligence was done on the JV partners of Air Asia India, and that SHA was “signed in a tearing hurry”. “It notes that group legal had done a limited due diligence on regulatory compliance at Air Asia India and had detected several serious regulatory infractions. Air Asia India was given one month to clean up the issues,” Sundaram said.
In June 2015, there was another email from Vasani stating that Air Asia India has a “very dysfunctional board” and has “no corporate governance”. “He records that most transactions are related party transactions and are never brought to the board,” Sundaram said.
Citing another e-mail exchange between PK Ghose, director of Air Asia India, and Mistry dated February 2016, Sundaram said the former noted the poor state of governance at Air Asia India, and that a discreet inquiry by Deloitte has been ordered. “It states that the “findings are not good at all”. The said email also resurfaces issues of effective control of Air Asia India,” Sundaram said. He also presented to the NCLT, two emails from Vasani dated September 28, 2016, and October 10, 2016. In September, Vasani had recommended to R Venkataramanan and other directors on the board of Air Asia India to conduct a Foreign Exchange Management Act, 1999 (FEMA) audit of transactions of Air Asia India.
In October, Vasani had reiterated that the Deloitte report and Statutory auditor’s report corroborate the concerns that he had raised on internal controls and governance in April 2015, well before his resignation in November 2015. Sundaram said that Mistry was removed as executive chairman in response to his efforts to clear up the mismanagement and fraud of Air Asia India, a company where R Venkataramanan, managing trustee of Tata Trusts is a director and owns 1.5% stake. “It must be noted that R Venkataramanan represents the majority shareholder of Tata Sons.”