 "Ousted Chairman of Tata Sons Cyrus Mistry leaves from Bombay House in Mumbai.")
The boards of Tata Steel and Tata Power were reportedly against “one-sided transport contracts” for M Pallonji and Company, triggering a conflict between Ratan Tata, current interim chairman of Tata Sons, and Cyrus Mistry, the ousted chairman.
The promoter of M Pallonji, Mehli Mistry, is a close friend of Tata.
According to a source close to the development, when Mehli’s contract with Tata Steel to transport limestone from Oman to India came up for renewal when Cyrus Mistry was the chairman in 2013, the matter was referred to the board. In the meeting, the independent directors raised several objections to the contract, saying it was tilted towards the logistics provider and was against the interests of Tata Steel.
Once the contract with Mehli expired, Tata Steel sought tenders from other shipping companies and the contract was given to another player, said a source in the Tata Steel board.
Apart from Tata Steel, Mehli had also received contracts from Tata Power for transport of coal. Many of these contracts were signed when Tata was the chairman and Mehli made huge profits because of these. Sources close to the Mistry camp said Cyrus went ahead and cancelled the contracts and invited fresh tenders.
By reworking the contracts, Mistry managed to save Rs 200 crore for Tata Power.
But the cancellation of contracts triggered a war of sorts between Tata and Cyrus Mistry, as Mehli was a close friend of Tata.
When contacted, Mehli Mistry’s office said he was travelling and unavailable for comments. The Tata Steel and Tata Power spokespersons and Mehli Mistry did not reply to emails.
Cyrus was also planning to file a suit against another close friend of Tata, C Sivasankaran, to recover Rs 700 crore due from him to buy back Tata Teleservices shares from NTT Docomo as per a 2009 contract. In fact, in a board meeting held in September this year, Tata Sons board recommended taking legal action against Sivasankaran. On September 19, Tata Sons, Tata Teleservices and Docomo received a legal notice, dated September 15, alleging oppression and mismanagement of Tata Teleservices. Mistry expressed surprised at the legal notice being received right after the decision of Tata Sons board to litigate against Siva.
Sources close to development said by taking on Tata’s close friends, Cyrus Mistry was losing goodwill with Ratan Tata who ruled the Tata group with an iron hand. The independent directors, however, supported Mistry who took several steps to bring the group back to rails. A day after Mistry was ousted, he said the Tata group is looking at potential writedowns worth $18 billion. Of this, the biggest potential write-down is in Tata Steel Ltd which will have to potentially write off $10 biliion (Rs 67,000 crore). Mistry blamed the financial mess on Ratan Tata’s term saying his overseas acquisitions resulted in huge losses for the group and potentially ruining the financial metrics of the group for a long time to come.
