Even as the high-profile committee constituted by Tata Sons Ltd launches an exercise to look for a new chairman after unceremoniously ousting Cyrus Mistry from the post last week, there is a slim chance that Mistry might fight his way back. Some legal experts are of the opinion that Mistry can approach the courts or institutions such as the National Company Law Tribunal (NCLT) alleging oppression and some others say that if Mistry does take the legal route, Tata Sons will have some tough questions to answer.

If media reports are to be believed, the Tata Group and Mistry have both hired public communication teams to handle the fallout of what promises to be a long-drawn, messy corporate feud between two of India’s best-known Parsi business families – the Tatas and the Shapoorji Pallonji Group. Mistry is the younger son of Pallonji Mistry, the chairman of the $4.2 billion Shapoorji Pallonji Group, one of India’s largest construction groups and also the largest single shareholder in Tata Sons. Tata Sons—the holding company for the Tata Group—is majority-owned by Tata Trusts, of which Ratan Tata is the chairman.

Mistry stepped into Tata’s shoes in December 2012 as the chairman of Tata Sons but was sacked suddenly on 24 October. After his ouster, Mistry hurled several allegations pertaining to undue interference, corporate governance violations, procedural impropriety and unethical dealings, on Tata and Tata Sons. Mistry also alleged that he was ousted illegally. 

Observers say that belligerence displayed by both the groups indicates that a long-drawn-out legal battle may be on the cards.

But can Mistry get his job back?

Mistry’s allegations

In his 25 October letter to the board of Tata Sons, Mistry alleged that he was promised a free hand but that never happened. He said that following his appointment as the chairman of the Tata Group, the Articles of Association were modified, “changing the rules of engagement between the Trusts, the board of Tata Sons, the chairman, and the operating companies”. Mistry goes on to say that “inappropriate interpretation” of the rules followed, which “severely constrained the ability of the group to engineer the necessary turnaround”.

The issue essentially relates to Article 118, which was amended in 2012 to give more powers to directors nominated by the Tata Trusts in the appointment and removal of the chairman.

Later, in the same letter, Mistry says that directors nominated by the Tata Trusts, the largest institutional shareholder in Tata Sons, were “reduced to mere postmen”. Mistry points out how once, two trust directors (Nitin Nohria and Vijay Singh) “had to leave a Tata Sons board meeting in progress for almost an hour, keeping the rest of the board waiting, in order to obtain instructions from Mr (Ratan) Tata”.

While some experts believe that this may be Mistry’s best legal bet, if he were to take the Tatas to court or approach the NCLT, others like Chandubhai Mehta, managing partner at Mumbai-based litigation law firm Dhruve Liladhar & Co, say his chances of getting his job back are dim. “The chances of Mr Mistry coming back to the board are very bleak. The only thing he can claim is damage to goodwill or reputation because of his wrongful removal.” Mehta added: “It’s (removal) the board’s decision and under the articles of association, one has to be bound to that.”

JN Gupta, who heads Stakeholders Empowerment Services, a Mumbai-based corporate governance advisory, also believes that Mistry has no real chance of heading back to the corner office at Bombay House. “The right of removal of a manager is very much with the shareholders. Moreover, there is nothing wrong with the will of the majority shareholders prevailing as long as it is in the interest of all shareholders,” he says.

Pavan Kumar Vijay, founder managing director at New Delhi-based financial and legal consultancy Corporate Professionals, however, feels that although Mistry has few legal options, he can certainly approach the NCLT. “He can go to the NCLT as a minority shareholder, but not as a director,” says Vijay. 

Minority shareholders holding more than 10% shares are allowed to approach the NCLT for redress and the Shapoorji Pallonji Group owns a little over 18% in Tata Sons.

Vijay says that Mistry could allege that as a minority shareholder he was oppressed by the members representing the Tata Trusts. “He certainly cannot claim mismanagement, since he was the group chairman himself,” he adds.

Having said that, Gupta admits that there are some legal grey areas that the Tatas will have to contend with. “Under what capacity did Ratan Tata call a meeting of all the company CEOs, when only the boards of the respective companies have the power to do so?” he asks.

Mistry has also questioned the foreign acquisition strategy of the group that “left a large debt overhang”, with the company’s European steel businesses facing a potential $10 billion impairment. In his letter, Mistry raised questions over the acquisition of assets by Indian Hotels, bad loans extended by Tata Capital which could cost the group $4-5 billion, the ongoing legal tussle between the Tatas and Japanese telecom giant NTT Docomo, which could potentially burn another billion-dollar hole, unethical deals at Air Asia and issues related to Tata Motors and Tata Power.

Incidentally, the market capitalisation of all listed Tata companies nearly doubled during Mistry’s four-year reign from Rs 4.6 trillion to Rs 8.5 trillion, with software services firm TCS accounting for half this value.

Experts say Mistry may be treading on thin ice when it comes to questioning foreign buys and other loss-making deals. “You cannot question the merits of a deal years after it has happened,” says Gupta, dismissing Mistry’s allegations, a view that Vijay shares.

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