An intense courtroom battle looms on the horizon as the Tata Group's ousted chairman Cyrus Mistry and holding company Tata Sons, now led by interim chairman Ratan Tata, look set to cross swords.
Media reports in various quarters say the Tata Group has already "filed a caveat at multiple legal platforms to avoid any ex parte order" against the group on its removal of Mistry at short notice. Tata Sons rulebooks, legal pundits say, mandate at least 15 days' notice to shareholders for any decision on changing the chairman. Mistry's ouster was announced apparently as the last item under "other issues to discuss on the agenda" at the Tata Sons board meeting on Monday.
Meanwhile, as rumours float that Mistry too is moving the Bombay High Court challenging the Tata decision, spokespersons at Shapoorji Pallonji -- Mistry's family business and one of the oldest in Mumbai -- say nothing is in the works yet. At 18 percent, Shapoorji Pallonji is the largest stakeholder in Tata Sons. According to a leading national daily, Mistry could move the court anytime this week led by past solicitor general Mohan Parasaran and senior lawyer Virag Tulzapurkar.
However, as various thoughts unfolded throughout the day on Tuesday, Ratan Tata, the scion of another old Mumbai family business, met all the heads of Tata businesses in Bombay House. He is said to have told them to "act as leaders in their respective markets and enhance returns to shareholders".
According to a press release issued by the group, Ratan Tata said, “The companies must focus on their market position vis-à-vis competition, and not compare themselves to their own past. The drive must be on leadership rather than to follow.” He is also believed to have told the senior leaderships that, he looked forward to working with them as in the past and not be concerned about the change in leadership. Yesterday itself, the Tata Group had announced constitution of a five-member selection committee to finalise a new chairman in four months. They include Ratan Tata himself, Venu Srinivasan, Amit Chandra and Ronen Sen.
Cyrus Mistry was the sixth chairman of Tata and continues to be a director of the company which he became in 2006. When he expressed extreme unhappiness in the way he was removed, the Tata board seems to have told him that there was "legal opinion" in favour of it and the boardroom was no court to challenge the decision.
To Autocar India readers, Mistry is best known for his role in Tata Motors, which he steered through turbulent waters in the past four years. During his tenure, he oversaw the introduction of several models and put the company on a product offensive not seen before in its history. The Zest and Bolt, the first two launches under his leadership, were met with a lukewarm response but the Tiago, which has clicked with budget car buyers, is seen as a turning point in the company’s fortunes. The Hexa, Mistry’s big bet in the premium segment, has got positive reviews and seems poised to ride on the Tiago’s success when it is launched in January 2017.
The worry now is that with Mistry gone, there could be delays in funding new projects. The stock market too today was not kind to Tata investors. Tata Group shares and HDFC weighed in on a 100-point drag down of the Sensex. All Tata companies traded between 1 percent and 4 percent lower, with top losers being Tata Steel and TCS.