Tata vs Mistry: Tracing the contours of India Inc's most sensational battle

TWO MUCH: Cyrus Mistry and Ratan Tata after the transfer of power. Photo: PTI
Close to three years after the biggest boardroom coup in India Inc, business journalist Deepali Gupta has written a pacy account of it. Tata vs Mistry: The Inside Story is an example of engaging story-telling based on material mostly available in the public domain through court affidavits and leaked letters from the two camps during the murky battle, in addition to extensive reportage and interviews. The challenge before Gupta, writing her first book, would have been to present in a compelling manner facts that have played out in the media in great detail not too long ago. The book claims to be a “sensational story” of a battle in corporate India. To that end, it has kept its promise.

Although Gupta has attempted to be objective, on many occasions she guides the reader in her expression of sympathy for the central character, Cyrus Mistry, the scion of the Shapoorji Pallonji (SP) Group, the construction conglomerate instrumental in shaping the skyline of Mumbai. For instance, the author writes that Mistry’s letter to the Tata board members a day after his sacking was full of emotion and evoked much sympathy. Mistry wrote, “to replace your chairman without so much as a word of explanation and without affording him an opportunity of defending himself in a summary manner must be unique in the annals of corporate history. … I can’t believe I was removed on grounds of non-performance.” Just a few months ago, his work was appreciated and the board had given him a raise.

Gupta clearly feels for Mistry when she says “these were all reasonable statements to make for a former chairman. Tata group’s silence on the matter swung public sympathy towards the Mistry camp”. She continues that “most people were trying to come to grips with this new world in which the Tata group seemed like any other corporate... This hire and fire avatar was baffling... Tata employees were considered secure from upheavals in the economic environment or even from an unkind boss”.

Gupta levels the sympathy for Mistry with her reference to his core group members — Madhu Kannan and Nirmalya Kumar — and their “un-Tata like approach”. She says an executive quit Tata Sons after he claimed he was treated poorly during Mistry’s term as chairman. A few paragraphs later, she tells the reader that “the recruitment of these professionals (Mistry’s core group members) was merely the execution of a vision he (Mistry) had shared while being interviewed for chairmanship”. Then, in a telling comment, she adds, “over time, of course, he (Mistry) had come to depend on their counsel”, indicating a lapse perhaps.

However, the real story of Tata vs Mistry is captured in the second half of the book. What really went wrong that Mistry had to be sacked a few months before his term was to end? “Deep-rooted discord” is how the book explains it. The discord was over how each side viewed conflict of interest. That forms the centre of the narrative halfway through the book.

The problems began as early as September 2013, just one year after Mistry took charge as chairman of Tata Sons. It was then that Ratan Tata wrote a letter reminding Mistry that he had not yet separated himself from his shareholding in the SP Group and Tata Sons, a pre-condition of which Mistry had been apprised. In a handwritten letter, Tata pointed out that Mistry’s reluctance to distance himself from his shareholding in the SP Group and Tata Sons was surprising and not in keeping with Tata Group’s values.

The letter of September 2013 also mentioned how Tata had proposed a structure such as a blind trust where the beneficiary (Mistry) would have no insight into how the investments were being managed or how its voting rights were being used. But Mistry, rejecting the blind trust as an instrument, suggested that he could safeguard against conflict of interest by adding appropriate clauses to the tender processes and contract documents involving the SP Group. He disagreed that there was any agreement to put his Tata Sons shares into a trust, saying “all our discussions on blind trust were to put all assets related to the Shapoorji Pallonji Group in a blind trust. Not to put any of my personal assets or the Tata Sons shares in a blind trust as that has no bearing on conflict of interest”.

Mistry also told Tata, his one-time mentor, “if there’s a rethinking on this, I would consider this a fundamental breach of trust”. Ratan Tata replied that he was unaware of any breach, pointing out that for years the SP Group had been a preferred contractor and had received large orders from the Tatas. When Mistry contested any preferential treatment, he was reminded of a large Tata Steel contract given at an inflated cost in a single tender to the SP Group. Stating that he felt “mistrusted”, Mistry listed out related-party transaction policies followed by General Motors, Prudential, Apple etc. Tata’s reply: related-party transactions and conflict of interest are two different things. Tata, in fact, sent out the conflict of interest rules for the same companies that Mistry had cited.

Tata was clear in his instructions that Mistry, who was carefully chosen as the “suitable boy” to steer the business, must remove himself from his family assets or discontinue business between the two groups he was straddling. Following that, Mistry directed Tata group companies to not give any further engineering and construction orders to his family business — SP Group companies.

It looked like the matter was settled but not at all. The deep-rooted discord would rear its head again and again, leading up to the boardroom sacking of Mistry on October 24, 2016, after a 60-minute proceeding.

The book also goes into detail about Mistry’s view of how the Tata business is being run. In the bulky affidavits and letters drafted after his sacking, Mistry spoke of the hotspot Tata businesses that could result in a write-off of $18 billion. He said he had sought to address the “intuitive and unscientific” style of working and “imprudent decision making and oppressive conduct” in Tata Sons. His efforts met with resistance, initially in polite terms and over time in a rising degree of resentment eventually leading to the events of October 24, 2016, Mistry said. The book talks about the 555 e-mails Mistry wrote to Ratan Tata in about three years, “indicative of the constant scrutiny” he was under.

In one of the initial chapters, Gupta writes that Mistry ticked all the right boxes when he was selected by a committee of eminent persons as Ratan Tata was stepping down at age 75. Mistry was an entrepreneur, he was familiar with the Tatas, his family held 18 per cent stake in Tata Sons and he was related to the Tata family — his sister was married to Noel Tata, Ratan Tata’s half brother. Mistry had a good relationship with Ratan Tata too — “seen as an important qualification for the job”.

Ratan Tata’s advice to Mistry when he took charge as chairman was, “how you deal with an aberration is a test of what you stand for rather than sweeping it under the carpet”. It was then that Mistry’s watch began, as the book points out. 

But the question remains: Whose “aberration” was it?

Tata vs Mistry: The inside story; Author: Deepali Gupta; Publisher: Juggernaut; Pages: 248; Price: Rs 599Mistry: The inside story; Author: Deepali Gupta; Publisher: Juggernaut; Pages: 248; Price: Rs 599

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel