Mistry as Tata Sons chairman: Cloud over key decisions, board appointments

What now for the Tatas: That question kept analysts, lawyers and industry watchers busy ever since the National Company Law Appellate Tribunal (NCLAT) delivered the surprising verdict on Wednesday afternoon, restoring Cyrus Mistry as executive chairman of Tata Sons, three years after he was sacked unceremoniously.

Besides loss of face for Tata Trusts and its chairman Ratan Tata, who had moved the resolution to remove Mistry in October 2016, there’s a question mark on the group’s business decisions and contracts undertaken during the past three years.

Even as Tata Sons Chairman N Chandrasekaran (Chandra) reached out to the employees of the group to address uncertainties and chaos following the judgment in an e-mail saying everyone should stay focused on business, a source in the know said the gloom in Bombay House, the Tata headquarters, was quite visible. 

More specifically, if Chandra’s appointment and decisions taken by him had been declared ‘’illegal’’ by the NCLAT, what would remain of the business, he asked. Cutting across sectors such as telecom, steel, automobile, aviation and power, numerous decisions have been taken on investments, deals, rights issue, transfer of equity and even business closure. Among the major decisions, Tatas settled the dispute with Japan’s NTT Docomo in November 2017 by paying $1.27 billion that was awarded by an international arbitration court for a stake it had in Tata Teleservices. Also, the Tatas, under Chandra, decided to get out of the telecom business, striking a deal with Sunil Mittal-led Bharti Airtel. Among other key decisions, a call was taken during Chandra's tenure to shut down Tata Nano — a pet project of Ratan Tata. Several other far-reaching decisions have been taken for Vistara, the airline the group operates, along with Singapore Airlines, as well as for Air Asia India, a joint venture with the Malaysian airline company.

If all those decisions are null and void, the group’s business will be in a mess, an official pointed out. 

Not only that, even appointments in the Tata Group will be frozen till there’s a stay from the Supreme Court, according to another source. The Tata Sons board of directors, for instance, has only eight members currently while the number can go up to 13. Besides Chandra, the board members are Saurabh Agrawal, Ajay Piramal, Venu Srinivasan, Farida Khambata, Harish Manwani, Ralf Speth and Bhaskar Bhat. The group is believed to have been in the process of inducting new members, including nominees from the Tata Trusts. All that will come to a halt now, an official said. Even at Tata Trusts, R Venkataramanan quit as the managing trustee earlier this year, but his successor is yet to be appointed. 

As for now, the Tatas are working overtime to seek a stay from the Supreme Court as soon as possible. A battery of lawyers, at least 26 of them, are already preparing to challenge the NCLAT verdict. A person close to the group argued that there’s no logic in reinstating Mistry as chairman of Tata Sons when he himself had only sought a board seat. ‘’How can NCLAT over rule decisions of the shareholders and listed companies of Tata group at validly constituted shareholder meeting,’’ he asked. 
While the Tribunal has granted four weeks for restoring Mistry as chairman of Tata Sons, his directorship in group companies comes into immediate effect in theory. But, these group companies have to convene board meetings to induct Mistry. The group is looking for a court stay before any board meeting comes up.

Aware of the questions that are being asked on his status as chairman, Chandra told Tata employees in an email, ‘’by now, you may have seen today’s NCLAT ruling which, apart from other things, raises issues on my appointment as executive chairman of Tata Sons. Tata Sons firmly believes in the strength of our case and will pursue the appropriate legal recourse.’’ He added, ‘’during this period, I wanted to reach out to you personally. I was asked to take on the role and responsibilities of executive chairman in February 2017. 

Since then, our efforts have been primarily focused on restoring stability and moving decisively towards a healthier financial position; conducting our businesses with the highest ethical standards, which the group has been known for, for over 150 years; honoring our commitments to all stakeholders and resolving outstanding issues; driving growth and transforming our businesses for the future.’’

CLICK HERE TO READ FULL TEXT OF THE NCLAT JUDGMENT


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