 "Cyrus Mistry and Ratan Tata")
The multiple stakeholders of the Tata Group, including foreign investors, and regulators such as Securities and Exchange Board of India and Ministry of Corporate Affairs, who are on high alert are keeping a close watch on the upcoming board meetings of the group's companies to approve their respective quarterly results.
Though ousted from the chairman's post in Tata Sons, Cyrus Mistry serves as the Chairman of Tata Steel, Tata Motors, Tata Consultancy Services (TCS), The Indian Hotels, Tata Global Beverages, Tata Chemicals, Tata Industries and Tata Teleservices. TCS declared numbers earlier this month.
According to data compiled by BS Research Bureau, 13 Tata companies are yet to declare their results for the quarter ended September 30. This list includes biggies such as Tata Steel, Tata Motors, Tata Power and Indian Hotels, which Mistry chairs. According to regulations, the companies are required to declare their quarterly numbers in 45 days. Most of these companies would call their board meets over the next couple of weeks to meet the November 15 deadline.
The way these boards deal with Mistry would determine the further course of events in the Tata vs Mistry saga. Legal experts feel the transition may not be smooth given the stand taken by Mistry and the tone of his leaked letter.
SN Ananthasubramanian, a senior company secretary, said, "The transition may not be smooth, but it is likely to be quick." According to him, though the procedure for removal would be broadly the same as what happened in Tata Sons, the articles of association of individual companies would also come into play. In Tata Sons, Mistry was redesignated as a non-executive director after the board passed necessary resolutions to replace him and appoint Ratan Tata as interim chairman.
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Further, Mistry himself would be more careful and apprehensive while approaching these board meets and their agenda papers. Two days after the big change at Tata Sons, Mistry came to Bombay House to chair a routine board meet of Tata Global Beverages, giving a signal that he may not resign on his own. On Friday, the board of Tata Teleservices (Maharashtra) met to approve and declare its results. However, there was no news of any change in board composition.
Another factor that would come into play is the mode of appointment. If the shareholders had appointed the chairman, then only they would have the right to remove him too. On the other hand, the shareholders only appointed him as the director and later the board elected him to chair, then the removal could be done by the board itself, said experts.
This is where the role of independent directors and nominee directors, who represent institutions, could come into play. Among independent directors of companies chaired by Mistry are eminent personalities such as Deepak Parekh, Nusli Wadia, Mallika Srinivasan, OP Bhatt, Narendra Jadhav, Ireena Vittal and Subodh Bhargava. Some like Wadia and Bhargava serve on more than one Tata board.
Ananthasubramanian feels the alignment of purpose displayed by directors of Tata Sons would be difficult to achieve in these different companies. "Especially, in those companies where Mistry has made allegations, people would be careful. If not managed well, things could turn messy," Ananthasubramanian said. A small misstep could end up in the courtroom triggering a protracted legal battle.
While some like Parekh have publicly expressed their displeasure, other independent directors have criticised the move in private. Parekh, who is an independent director on the Indian Hotels board, said earlier this week that "Cyrus was removed despite doing a reasonably good job", adding that "Mistry's ouster doesn't go well for Indian business and India's reputation".
Therefore, an early announcement of the successor, probably even before some of these crucial board meets, could be on the cards to allay concerns, some insiders feel, citing the quick elevation of TCS chief Chandrasekaran and Jaguar Land Rover's Ralf Spelth to the Tata Sons board.
Tata himself has reached out to Life Insurance Corporation and his lieutenants are busy engaging other local and foreign institutions to restore confidence in the market.
It is not clear if all this would fuel more boardroom drama in coming days. Prithvi Haldea, founder of Prime Database and recently appointed public interest director of MCX, said it is unlikely that even in these listed companies there are directors purely from Mistry's camp. "All these directors are appointed by the promoters. It is unlikely that anyone would go against them," Haldea said.
