1. Here’s why Cyrus Mistry never got a chance to present his case against Ratan Tata

Here’s why Cyrus Mistry never got a chance to present his case against Ratan Tata

The national company Law Tribunal (NCLT)’s refusal to waive aside a minimum shareholding requirement that would have allowed minority shareholders in Tata Sons—the Shapoorji Pallonji Group—to initiate action against ‘oppression and...

By: | Published: April 26, 2017 6:24 AM
The Group’s association with the Tatas goes back some five decades and consequently, the tribunal could perhaps have chosen to taken a broader view of the circumstances rather than merely go by the numbers. (Reuters)

The national company Law Tribunal (NCLT)’s refusal to waive aside a minimum shareholding requirement that would have allowed minority shareholders in Tata Sons—the Shapoorji Pallonji Group—to initiate action against ‘oppression and mismanagement of minority interest’ is rather unfortunate. The judges have cited their reasons for insisting on sticking to the rules that insist on a minimum shareholding of 10%—which Pallonji does not have once you include preference shares—and while minority shareholders can be annoying and complain frivolously, it should have used its powers to waive the eligibility clause. After all, the Pallonji Group is not just another minority shareholder. The Group’s association with the Tatas goes back some five decades and consequently, the tribunal could perhaps have chosen to taken a broader view of the circumstances rather than merely go by the numbers. As has been pointed out, there are only two sets of shareholders in Tata Sons, so the traditional rules—the 10% rule is to rule out frivolous complaints—probably didn’t make sense anyway.

As a result of this adherence to a technicality, Cyrus Mistry—who was unceremoniously ousted from the post of chairman of Tata Sons on October 24, 2016—was not even allowed to plead his case. Given his hands-on experience as chairman of Tata Sons for four years since December 2012, a post to which he was appointed with the consent and blessings of Ratan Tata, his credibility cannot possibly be in question. That also means that, till December 2012, Mistry had been doing everything right as a director. However, after taking over as chairman and consequently working closely with the group companies, if Mistry believes all is not well within the Tata Group and that there are instances of corporate misgovernance, he should at least have been given a chance to prove the allegations.

Mistry’s performance, over the last four years, has been commended by many in the corporate world—independent directors on the board of Indian Hotels supported him for his performance. Indeed, had the NCLT given Mistry the chance to present his case, this would even have helped Ratan Tata prove that he was right and that there was no mismanagement as Mistry was alleging.

Also, while Tata Sons may be an unlisted company, it is different from other unlisted companies in that it is the holding company for more than a dozen group companies, all of which are listed entities. More critically, the Tata Sons board has been taking crucial decisions relating to these companies; the acquisition of Corus by Tata Steel, and indeed, the numerous other acquisitions would all have been discussed by the board. And while the NCLT has observed that Ratan Tata has been instrumental in making the Tata group a $100 billion conglomerate, the fact is many of the companies are over-leveraged and in poor financial condition; it is Mistry who worked to get them back into shape and present a true picture of their finances. Also, given how the Pallonji family’s fortunes are tied to the Tata Group, it is unlikely it would want to hurt the Tata Group. Had they been allowed to argue the case, all minority shareholders—across all group companies—would have had a better understanding of the group’s functioning.

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  1. J
    Jon
    Apr 27, 2017 at 3:34 am
    Cyrus Mistry was the Chairman at Tata Sons. Cyrus Mistry had every chance to be open and honest about what he REALLY wanted to do as a leader. If Cyrus Mistry were a real leader with a compelling vision who pla nicely,and respect his colleagues He would still be there! Cyrus Mistry harboured a personal vendetta and wanted to separate The Trusts from Tata Sons. Cyrus Mistry does not agree with his BOD as they would not like to separate the Trusts from Tata Sons and understand the structure as it relates to Social Plow Back. Cyrus Mistry would be spanked by Jamsetji Tata if he were alive today! Cyrus Mistry was not a qualified selection and unfortunatley a few of us knew this at the time but out of courtesy, and searching for someone who was familiar and young enough her was chosen. Big Mistake. The difference between Tata and Mistry is simple,Tata is willing to Admit the mistake and Mistry never will!
    Reply
    1. Pradip Khajanchi
      Apr 26, 2017 at 6:56 pm
      After all govering bodies decide for market and people's money involved in such groups. Not for Tatas or any any body else?
      Reply
      1. U
        umair
        Apr 26, 2017 at 6:38 pm
        its a really cool express really i enjo ur full article..keep it up bro free subscribers
        Reply
        1. P
          Prasad
          Apr 26, 2017 at 11:04 am
          another paid article in defence of cyrus mistry.
          Reply
          1. R
            Raghav
            Apr 26, 2017 at 10:56 am
            JRD was a cl apart and held the legacy of the company well. RT has and is trying his best to save his legacy in the shroud of Tata values. After all, shareholders voice must matter over `mani tive' values. RT instead of acting as a custodian / trustee has gone around creating this circus and must pay for it.
            Reply
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