The NCLT said that the reason for the removal of former Tata Sons chairman Cyrus Mistry was the trust deficit between Mistry, the board and the Tata Trusts, the majority shareholders, which own two-thirds of the holding company. “The Welspun issue, Ola and Uber and other issues… it can be inferred the trust deficit started growing between Mistry and Tata Trusts which does not go well in a company of that size.”
“It is a decision taken by the competent body to end this trust deficit and to move forward.”
Tata Trusts had argued it wasn’t informed about that the decision to purchase Welspun Renewables despite an Article of Association insisting that any purchase above Rs100 crore have to be informed. In the case of Ola and Uber, despite a request by Ratan Tata to explore an opportunity to supply a large number of passenger cars to the to the online car rental chain, the matter was not pursued. Tatas argued Mistry had concentrated power in his own hands in all the major Tata companies resulting in many of the operating companies drifting apart from the group and Tata Sons, through a systematic reduction of control and influence by the holding company over them, the court document showed.
Last week, NCLT dismissed the lawsuit filed by two Mistry’s family firms against Tata Sons, saying it didn’t find merit in allegations of mismanagement at the $100 billion conglomerate. The court order documented all the arguments presented by both sides.
“After the advent of Cyrus as chairman, he has gradually over the course of his tenure concentrated power and authority in his own hands as chairman in all the major Tata operating companies where there are no longer any representatives from the board of Tata Sons, as had always been the case in the past and which had ensured cohesion in the group,” said Tata, in his reply to the petition filed by Mistry’s family firms at the NCLT .
Tata said he was informed that there was little or no intention on the part of Mistry to encourage active discussion on the board on important business decisions and a strategy to steer the company forward.
“There were instances where details of significant business items to be transacted in the business of a board meeting would be shared with the Trust nominee directors shortly before the scheduled board meeting thereby depriving the Trust nominated directors the opportunity to adequately prepare and present their views to the board, apart there from, he had refused to engage constructively with the trusts,” Tata said. Tata made several endeavours to impress upon Cyrus that there was brewing discontentment in the board, but such efforts didn’t yield results and it became clear that the selection committee and Tata in his personal capacity, had failed in their duty to identify a candidate for chairmanship The court document also showed that Tata Sons board member Nitin Nohria volunteered to draft governance document clarifying the role of the Tata Trusts in the affairs of the company.
The NCLT order said that it has not seen any merit in the allegation raised by Mistry on the allegation that Tata made enormous profits by selling the apartment he stayed at Bakhtavar Building at Colaba between 1968 and 2000 at the expense of the company.