Cyrus Mistry fired first shot at Ratan Tata? Mooted governance draft to restrict Tata Sons role

By: | Updated: January 19, 2017 4:41 PM

Draft framework was sent by Mistry to Tata a month before he was sacked

tata-sons-l-ptiSources said that the draft framework was sent by Mistry to Tata a month before he was removed as chairman. (PTI)

Ousted Tata Sons chairman Cyrus Mistry had mooted a draft corporate governance framework which was sent to Ratan Tata proposing to restrict and streamline the role of Tata Sons board in the operating companies to just being directional rather than prescriptive. However, before the proposals could be taken up for discussions Mistry was abruptly sacked at a board meeting on october 24.

Sources said that the draft framework was sent by Mistry to Tata a month before he was removed as chairman.
The framework also proposed providing a proper structure to the group, defining and demarcating the role of the various power centres and more importantly, restricting the role of Tata Sons’ board to just providing feedback and not approving or disapproving the decisions of operating companies, sources in the know of things said.

In the letter accompanying the framework, Mistry had written that this was important since many of the directors were “not clear about their role as a holding company director”.

This assumes importance as after his ouster, Mistry has repeatedly claimed that he had ended up becoming a lame-duck chairman due to the constant interference of Ratan Tata and the Tata Trusts. Even in his affidavit filed at the National Company Law Tribunal (NCLT), Mistry has alleged that Ratan Tata used to constantly interfere in the decision making process of Tata Sons and the operating companies and had even “started asserting the need to see plans and proposal beforehand”.

Claiming that while he always took extra care when dealing with Ratan Tata and his interference, Mistry has stated in his affidavit that over time he realised managing the demands and views of Ratan Tata had become his full time role.

In his submission to the NCLT, Mistry has stated that when Ratan Tata was the chairman of Tata Sons, he was also the chairman of key operating companies and the Tata Trusts and hence was able to take decisions without any interference. But since that changed after Tata’s retirement and Mistry’s elevation to the Tata Sons’ chairman’s post, putting in place a corporate governance structure had become extremely important to put the checks and balances, Mistry has contended, adding that his removal has exposed Tata Group companies to the “threat of serious oppressive conduct” by the Tatas.

Following Mistry’s removal from the chairmanship of Tata Sons on October 24, the two sides have been involved in a bitter battle that started in the board room but is now out in the courts. First, Mistry stepped down as director of all other listed Tata Group companies following him being voted out of the board of Tata Consultancy Services (TCS) in an EGM. Then he approached the NCLT seeking relief under sections 241 and 242 of the Companies Act, 2013.

The Tatas, on their part, claim that Mistry was replaced because of under performance and not having kept in mind the ethos of the Tata Group. They have also submitted to the NCLT that he doesn’t have a 10% stake (equity + preference shares) in Tata Sons to approach it for relief under sections 241 and 242 of the Companies Act, 2013, while appointing N Chandrasekaran as the new chairman of Tata Sons and convening an EGM on February 6 to seek Mistry’s removal from the board.

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