Cyrus Mistry unlikely to take up a board position, may appoint nominees

Even as the National Company Law Appellate Tribunal (NCLAT) reinstated Cyrus Mistry as chairman of Tata Sons and three other group companies last week, he is unlikely to take up a board position at any of these companies. Sources in the know said he might appoint nominee directors who would ensure best practices of corporate governance at Tata group companies. 

Sources said Mistry wanted to keep an effective oversight without being the part of operations at the Tata group. Mistry has only five months left of his tenure as chairman and that’s one of the reasons why he is not keen to return to the board. He had joined the Tata Sons board as a director in 2006, though he was initially not too keen to take up the chairmanship, said sources close to Mistry. 

It is learnt that Mistry and his team are reviewing the legal situation, considering that he may have to fight a battle in the Supreme Court as Tata Sons is expected to challenge the appellate tribunal's order.

Sources close to the development, however, ruled out the possibility of Mistry joining the board as executive chairman or even taking up any directorship position even if the apex court upheld the appellate order. 

The NCLAT directed Tata Sons to reinstate Mistry as chairman and director of the holding company and three listed group companies -- Tata Consultancy Services (TCS), Tata Motors, and Tata Steel. However, the tribunal suspended its implementation for four weeks in a bid to provide the Tatas time to appeal. 

In his petition to the National Company Law Tribunal (NCLT) and the NCLAT, Mistry had alleged the breakdown of corporate governance and the failure of board of directors. Mistry through his nominees would ensure corrective action and focus more on the growth strategy for the future of Tata companies. 

Mistry had refused to resign as director in various group companies after he was removed as chairman of Tata Sons in October 2016. But later he had voluntarily stepped down after Tata Sons called extraordinary general meetings at these listed companies for his removal as chairman and director. 

Sources said Mistry was of the opinion that the last three years had been very challenging for the entire Tata group companies and that happened due to lack of a governance framework. Mistry in his letter to Tata Sons board in 2016 was extremely critical about the investment in the airline industry and clearly stated how he was against the two joint ventures, Vistara and AirAsia India. 

“Tata Sons has not changed any of the strategy in the past three years apart from heavy investments in aviation despite making huge losses, indicating that internal controls have been lax,” said a source. He also pointed out that losses in the telecom segment are more than what Mistry predicted and stated in the letter to the board. 

In an explosive confidential email to Tata Sons board members in 2016, Mistry had warned that the salt-to-software giant might face Rs 1.18 trillion in write-downs because of five unprofitable businesses he had inherited. Mistry said he inherited a debt-laden enterprise saddled with losses, and went on to single out Indian Hotels, passenger-vehicle operations of Tata Motors, European operations of Tata Steel, parts of Tata Power, and the telecommunications subsidiary as ‘legacy hotspots’."

In the Registrar of Companies’ (RoC Mumbai's) review petition against the NCLAT order, Mistry and his team are party, even though the tribunal has not sought any response from them. They may, however, provide their views and submit their objections if the tribunal asks them to, sources said. The hearing is slated on January 2. 

The RoC in its 700-page review petition sought the removal of the words "illegal" and “with the help of RoC" in the tribunal’s order pertaining to Tata Sons' transition from a public to private company in September 2017.

In the order dated December 18, the NCLAT had passed serious strictures against the RoC, stating that Tata Sons had hurriedly changed its status to a private company from public "with the help of the RoC", which was “illegal”. 

The NCLAT had said the RoC, in the Certificate, had struck down the word ‘public’ and shown ‘Tata Sons Limited' as a 'private' company, even in the absence of any order passed by the tribunal under Section 14 of the Companies Act, 2013. The appellate tribunal had directed the RoC to make correction in its record, showing Tata Sons as 

“public company”.