Big setback for Cyrus Mistry in fight against Tata Sons, this is what NCLT did
Cyrus Mistry had alleged mismanagement and oppression of minority shareholders by Tata Sons Chairman emeritus Ratan Tata and other trustees. Earlier, the ousted chairman fired a fresh salvo at the management questioning the rationale behind some actions like the free sale of its telecom arm to Airtel, massive debt-driven acquisitions by Tata Steel and its unequal tie-up with Thyssenkrupp, and a first-ever dip in TCS profit among others.
In yet another setback for former Tata Group chief Cyrus Mistry, the Mumbai Bench of the National Company Law Tribunal (NCLT) today ruled that Tata Sons board of directors had the right to remove executive directors and that there was nothing wrong with the process that was carried out. Notably, Mistry was sacked by Tata Sons in swift moves initiated by former chief Ratan Tata.
Cyrus Mistry had alleged mismanagement and oppression of minority shareholdes by Tata Sons Chairman emeritus Ratan Tata and other trustees. In the first week of this month, the ousted chairman fired a fresh salvo at the management questioning the rationale behind some actions like the free sale of its telecom arm to Airtel, massive debt-driven acquisitions by Tata Steel and its unequal tie-up with Thyssenkrupp, and a first-ever dip in TCS profit among others.
In a letter to the directors of Tata Sons, Cyrus Investments, which is the key investment vehicle of the Mistry family and the key petitioner in his legal feud with the Tatas, Mistry reportedly sought accountability and information from the board of Tata Sons in which his family owns 18.34 per cent.
A PTI report stated to have seen the 8-page letter, titled Tata Group Strategy/Performance/Governance Issues dated June 30 and addressed to the entire board of Tata Sons. The office of Mistry did not respond to the calls, while Tata Sons declined to comment.
The Mumbai bench of the NCLT delivered its verdict today on the bitter legal feud that Mistry has been fighting ever since dismissal as the chairman of the Tats Sons on October 24, 2016.
The key allegation by Mistry camp is that his removal as chairman and subsequently as a director of the board Tata Sons was a result of oppression by the promoters who are in turn owned by Tata Trusts that owns over 68 per cent in Tata Sons.
Stating that the board is accountable for governance and performance of the Tata Group as also to the minority shareholders, the letter reportedly said that despite staring at several burning issues, "Tata Sons is hiding behind the veneer of media management to present a rosy picture."
The letter reportedly questioned the "free transfer of Tata Teleservices" to Airtel, saying the Tatas did not get any benefit from the deal despite transferring 40 million customers, a large swathe of liberalised spectrum and access to Tata Tele's extensive fibre network, while it has immensely benefited the acquirer.
Terming the deal, which led to an increase in market capitalisation of Airtel by almost Rs 30,000 crore, as a "sweetheart deal," Mistry says, "he fails to understand the logic of offering Bharti Airtel access to these assets effectively for free."
In the letter, Mistry reportedly also came out strongly against the clean-chit given by the Tata Sons board to R Venkataramanan, its nominee on the AirAsia India board and the managing trustee of Tata Trusts, "without conducting any known independent investigation."
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This the letter reportedly said is "a continuing act of mismanagement and failure to carry out fiduciary duty" and termed the board decision to allow Venkataramanan, has brought reputational risks to Tata Sons and the group to continue in his position as "unprecedented" as it has "sent a terrible message to hundreds of thousands of Tata employees".