Tata has four weeks to appeal the court decision before Mistry can technically resume his old job. — Reuters
MUMBAI: For more than 150 years, the Tata Group has been synonymous with India’s nation-building project, venturing into everything from autos to airlines when the country needed them.
And no executive better personified India’s emergence on the world stage than Ratan Tata, whose string of dazzling takeovers took a largely domestic firm global.
Now at 81, Tata’s legacy is under threat. An internecine war over the conglomerate’s future took a crippling turn Wednesday, showing that even the famed Tatas aren’t immune to the corporate governance troubles that often plague the family businesses that still dominate India’s economy.
In a surprise ruling, an appeals court said Tata’s erstwhile successor, Cyrus Mistry, was improperly ousted as chairman of the group’s holding company three years ago, paving the way for his reinstatement.
In a further blow to the elderly tycoon, the court found the group’s move to restrict Mistry’s family from selling out of the holding was unlawful and must be reversed.
Tata can appeal the ruling to India’s Supreme Court. But the turmoil couldn’t have hit at a worse time for the US$110 billion (RM456bil) conglomerate, whose products range from salt to software.
It comes just as the group contends with a crisis at its British unit, Jaguar Land Rover automotive Plc — one of the crown jewels of Ratan Tata’s buying spree — and a crushing economic slowdown at home that’s damped demand for wares from steel to Tetley teas.
“It is a battle for honour and prestige,” said Shriram Subramanian, founder of proxy advisory firm InGovern Research Services Pvt. Ltd. “This ruling is a vindication of the position taken by Cyrus Mistry that his removal was illegal.”
The court found the manner of Mistry’s ouster “oppressive” and restrained Ratan Tata from taking any action that would require a majority decision by the board of holding company Tata Sons Ltd.
(He also heads Tata Trusts, a group of philanthropic organizations that own about 66% of the equity in Tata Sons.)
The ruling leaves Tata rudderless as it faces a string of urgent decisions, including an attempt to find a partner to turn around Jaguar Land Rover and job cuts at its European steel operations.
With a question mark over leadership at the group, Tata has four weeks to appeal the decision before Mistry can technically resume his old job.
The group is putting on a brave face. Natarajan Chandrasekaran, who was named chairman of Tata Sons in 2017 told employees to stay focused on their work to restore the company’s financial position.
The ruling will be appealed, he said in a letter to workers obtained by Bloomberg News, and confirmed by a Tata spokesman. The court order appears to have gone beyond even Mistry’s demands, Tata Sons said in a statement late Wednesday.
When Tata handpicked Mistry to succeed him in 2012, it seemed like a perfect fit.
Mistry is the son of billionaire Pallonji Mistry, the largest shareholder of the Tata Group outside the family itself. Both hail from the same tiny Parsi religious community.
However, the two soon started to clash as Mistry’s efforts to turn around unprofitable businesses — which he claimed would otherwise face 1.18 trillion rupees (RM66bil) in writedowns — threatened to roll back some of the empire-building Ratan had engineered.
Keyword: Shock court order threatens legacy of Tata’s legendary dealmaker