Mistry family has no right to nominate director: Tata Sons

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Mumbai | Published: January 9, 2017 11:44:58 PM

Ahead of the February 6 shareholders' meeting to remove Cyrus P Mistry as director on Tata Sons, the holding company of Tata Group has said the Mistry family did not have any right to nominate a director on the board as the Articles of Association do not provide for it.

Tata Sons had abruptly removed Mistry as its Chairman on October 24 and sought his ouster from operating companies like Tata Motors and TCS. (Reuters)Tata Sons had abruptly removed Mistry as its Chairman on October 24 and sought his ouster from operating companies like Tata Motors and TCS. (Reuters)

Ahead of the February 6 shareholders’ meeting to remove Cyrus P Mistry as director on Tata Sons, the holding company of Tata Group has said the Mistry family did not have any right to nominate a director on the board as the Articles of Association do not provide for it.

In an affidavit filed in response to the petition filed by investment firms of the ousted Chairman Cyrus P Mistry, Tata Sons said Pallonji Shapoorji Mistry was the first person from the Shapoorji Pallonji family to be appointed as a director on the board of the holding company in 1980 even though it has held 18.4 per cent stake since 1965.

“Pallonji Shapoorji Mistry retired as director in 2004. After a hiatus of almost 2 years, (his son) Cyrus Mistry was appointed as a director on the board of Tata Sons. Neither the appointment of Pallonji Shapoorji Mistry nor Cyrus Mistry was by virtue of any nomination right.

“In fact, it was Ratan N Tata who proposed the appointment of Cyrus Mistry to the board of directors of Tata Sons. If the Petitioners had any right of nomination of a director to the board, provision for this would have been made in the articles of association of Tata Sons,” it said.

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Tata Sons had abruptly removed Mistry as its Chairman on October 24 and sought his ouster from operating companies like Tata Motors and TCS. Mistry subsequently resigned from the board of six companies, but dragged Tata Sons and his interim successor Ratan Tata to the National Company Law Tribunal.

After the board meeting of October 24, 2016, Tata Sons had resolved that Mistry shall, notwithstanding his ceasing to be the Chairman, continue as a director of the company.

But his conduct thereafter in levelling “unsubstantiated” allegations and causing “enormous harm” to Tata Group had made his continuation as a Director of Tata Sons “untenable” and therefore, he should be removed, Tata Sons had said in a notice seeking Extraordinary General Meeting on February 6.

In the affidavit, Tata Sons said the Petitioners’ averment that they have been represented at the board of Tata Sons for “several decades” lays bare the “entirely specious and false case”.

It added: “Given that the Petitioners themselves acknowledge that they have been represented at the board of Tata Sons, albeit without admitting that the Petitioners have any right of representation or nomination, at no point of time previously has any issue been raised by the Petitioners either in relation to the management structure adopted by Tata Sons or in relation to the business and commercial decisions/ ventures pursued by Tata Sons.

“In fact, no opposition, objection or reservation has ever been expressed by the Petitioners and/or Cyrus Mistry in relation” to this.

The decision to replace Mistry from the chairmanship of Tata Sons was taken by a majority of the board with 7 out of 9 directors voting in favour. “It is clearly evident that board of Tata Sons in its collective wisdom found it in the best interests of Tata Sons to remove Mistry from the chairmanship of Tata Sons.”

Reacting to Tata Sons’ affidavit, sources in Cyrus Mistry camp said he and the petitioners — the investment firms — will file their rejoinder “on all facts and issues that are involved in the proceedings”.

“A full and fitting reply will be filed within applicable deadlines,” a source said, adding “it is but natural that Tata Sons and its directors and the trustees of Tata Trusts would deny allegations and level counter-allegations”.

Tata Sons in the affidavit said the petitioners have “wrongly” asserted that Mistry was their nominee on the board of Tata Sons.

“Tata Sons submits that the Petitioners have no right of nomination on the board of Tata Sons under the Articles of Association or otherwise and the same is evident from the Articles of Association of Tata Sons duly approved by the Petitioners,” it said.

Any such claim, it said, is wrong and denied.

“It now appears that the intention of the Petitioners behind filing the petition (before NCLT) is that the Petitioners now want to demand nomination on the board of Tata Sons which can never be allowed. the Petitioners are misusing the present forum for their ulterior motives,” it added.

Tata Sons alleged that Mistry has projected in his affidavit that he had acted in the best interest of the company. “In fact, there are several instances to show that he had acted to the detriment of Tata Sons.”

“Mistry leaked scores of confidential and commercially sensitive correspondence/statements/documents in contravention of Tata Sons’ Code of Conduct,” said the Tata Sons affidavit.

“Mistry violated confidentiality undertaking provided by him to Tata Sons and his legal duties as a Director of Tata Sons and other Tata group companies. Besides, he parted with internal company records to third party entities including the Petitioners, who would otherwise not have access to these documents,” the affidavit of Tata Sons said.

Mistry had sent several documents containing confidential information regarding Tata Sons to the Deputy Commissioner of Income Tax without the approval of the Board of Directors, the affidavit of Tata Sons further said.

“Cyrus Mistry has filed voluminous documents along with his affidavit with the intent to fill in the obvious lacunae in the Petition (filed by Cyrus Mistry Investments). By doing so, Mistry is attempting to support unsubstantiated allegations levelled by the Petitioners,” Tata Sons alleged.

Tata Sons submitted that as a co-Respondent in the Petition, Cyrus Mistry cannot supplement the case made out by the Petitioners. “If anything, Mistry’s affidavit demonstrates beyond doubt that the Petitioners and Cyrus Mistry are indeed acting in concert with each other and that Mistry is the directing mind and will of Petitioners,” the affidavit said.

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