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The question over whether Cyrus Mistry’s removal will be sought from the board of Tata Sons, the only remaining Tata Group entity, where the conglomerate’s sacked chairman is still a director, has finally been answered.
The board of directors of Tata Sons has received a requisition from one of Tata Sons’ shareholders seeking Mistry’s removal as director of the flagship holding company of the salt-to-software group, according to a person familiar with the development, who didn’t want to be identified.
“The company’s board has acted on this resolution and an extraordinary general meeting of Tata Sons’ shareholders will be called to decide on this matter,” this person said.
Though the exact identity of the requisitioning shareholders couldn’t be ascertained, the source indicated that the proposal to remove Mistry as director had most likely been initiated by one of the many philanthropic trusts that holds a stake in the company.
The Shapoorji Pallonji (SP) Group, whose patriarch Pallonji Mistry is Cyrus’ father, holds 18.4 percent of Tata Sons. The Tata Trusts, which comprises a clutch of charitable bodies that use dividend income from Tata Sons for their social welfare activities, own 66 percent of the company. Though the SP Group is the single largest shareholder in Tata Sons, there is no shareholder agreement that guarantees it a board seat.
Tata Sons is the last bastion from which Mistry is being sought to be removed, after which his exit from Bombay House, the 149-year-old conglomerate’s headquarters in Mumbai, will be complete. On October 24, 2016, Mistry was unceremoniously sacked as Tata Sons chairman after irreconcilable differences between him and the Tata Trusts, and other directors of Tata Sons, came to the surface. Since then, a war of words has ensued between both sides with several allegations of non-performance, lack of corporate governance, and an attempt to dismantle the conglomerate structure have been leveled by each camp against the other.
Tata Sons, as the principal promoter shareholder of group operating companies, had moved requisitions to call for EGMs of shareholders at these firms to vote on a resolution to remove Mistry as a director. A few days after being removed as chairman and director of Tata Consultancy Services through a shareholders’ vote, Mistry decided to step down from the boards of other group companies like Indian Hotel Co, Tata Power, Tata Steel, Tata Chemicals and Tata Motors. Mistry took his fight against the conglomerate, including his predecessor and current interim chairman Ratan Tata, to a legal forum instead.
The case is currently pending in the National Company Law Tribunal (NCLT), which is scheduled to resume hearing the matter on January 31, 2017. In the first hearing before the NCLT on December 22, the legal counsel representing the SP Group’s investment firms that hold the Mistry family’s stake in Tata Sons had petitioned the court to grant interim relief to the petitioners. One such relief measure sought was to restrain Tata Sons from attempting to remove Mistry from the company’s board. However, the tribunal didn’t grant any interim relief to the petitioners, and that paved the way for the company to move the resolution proposing Mistry’s ouster.
During the December 22 hearing, the counsels from both sides agreed not to move a petition in any other legal forum, pending disposal of the present case by the NCLT. But it remains to be seen if the Mistry camp will mount a fresh legal challenge in response to the proposed move to remove him from Tata Sons.
Though the reasons put down in the resolution brought before Tata Sons’ board seeking Mistry’s ouster aren’t in the public domain, it won’t be surprising if its language echoes that of the EGM notices that were sent to shareholders of group operating companies. These notices had asked sought Mistry’s removal on grounds of the fact that Mistry had lost the confidence of the promoter shareholders of these companies, led by Tata Sons.