When Ratan Tata last Sunday addressed Tata executives at the conglomerate’s annual leadership conference, the 80-year-old group patriarch pointedly told them that the company had grown to $100bn in sales “not through mismanagement or unethical procedures”.
To the assembled managers, the message was clear: India’s largest business group should now move on from the damaging controversy of one of its darkest episodes .
On July 9, India’s National Company Law Tribunal ruled that holding company Tata Sons was within its rights to dismiss its chairman Cyrus Mistry in October 2016. Mr Mistry had swiftly launched a lawsuit against his ousting, and unleashed a series of allegations against the group.
In its ruling, the court dismissed his claims of governance failings at the holding company and specific operating units, and of illegal interference in company affairs by Mr Tata during Mr Mistry’s brief tenure. Mr Mistry “should have been more careful in making allegations”, the ruling said.
Mr Mistry — who had said from the start that he would take his case to the Supreme Court if necessary — immediately vowed to appeal, saying that he would bring fresh evidence to bear. “Subsequent facts and developments that continue to evidence oppression and mismanagement will be under scrutiny and will be pursued in full earnest,” he said.
But Mumbai market watchers gave Mr Mistry little chance of succeeding in his legal campaign, and suggested that the group would now be able to move on even as it worked through the appeal process. “I don’t think it’s going to occupy the front pages any more,” said Prabodh Agarwal, chief financial officer of IIFL Holdings, a financial group. “Those allegations have been put to rest now. It’s really cleared the Tata name.”
The leadership conference where Mr Tata spoke marked the reopening of Bombay House, Tata’s headquarters. It had undergone its first renovation since 1924 on the orders of new chairman Natarajan Chandrasekaran— a project seen as symbolic of his broader mission to reinvigorate the group after a period of damaging distraction for the management. “The Tata Group is in safe hands,” said Mr Tata, who remains the chairman of the Tata Trusts, a group of charitable bodies that own 65 per cent of Tata Sons.
Mr Mistry took over in December 2012 from Mr Tata, who had presided over two decades of dramatic growth since becoming chairman in 1991. His tenure was shortlived, lasting less than four years. While Mr Mistry said he was sacked for resisting interference by Mr Tata, the company said he had failed to pursue a clear strategy and dithered over key challenges.
“Cyrus was too slow, probably not clear himself what was to be done,” one Tata company director said.
In contrast, Mr Chandrasekaran — previously the chief executive of the conglomerate’s flagship business Tata Consultancy Services — has been seen as giving a new impetus to the group, settling some longstanding strategic headaches.
Within weeks of taking over, he sealed an agreement in principle with NTT DoCoMo to end a bitter dispute over the Japanese group’s investment in struggling Tata Teleservices, paving the way for a sale of the telecom operator’s core business months later. Mr Mistry had come under fire from internal critics for not settling that dispute sooner.
Another step forward for Mr Chandrasekaran came last September, when Tata agreed the merger of its European steel business with that of ThyssenKrupp — although the German group has since come under shareholder pressure to renegotiate. These talks began during Mr Mistry’s tenure, after Tata sparked concern in the UK by warning that its Port Talbot plant would have to be sold if a buyer could not be found.
Behind the scenes, Mr Chandrasekaran has shaken up the senior levels of the group, bringing in a team of former bankers to oversee the group’s finances, and replacing the leadership of some large units including the financial services and hotel businesses.
“This guy doesn’t waste time,” one Tata company director said. “He’s bringing together people he can trust, and getting rid of people who are either not competent or who he finds difficult to work with. He’s getting across the message that weakness will not be tolerated.”
Other insiders caution that Mr Chandrasekaran still has tough challenges ahead. One longstanding adviser warned that the group is still heavily loaded with debt at major businesses such as Tata Power, and that it still relies too heavily on TCS, which accounts for the clear bulk of group profits. “Siphoning cash from TCS is not something you can do forever,” the person said.
Amit Tandon, co-founder of research firm Institutional Investor Advisory Services, said: “On account of the work Chandrasekaran’s been doing in the group, people are putting all that [ The legal battle] behind them. Investors are not . . . asking questions about the structure and so on.”
Meanwhile, Mr Mistry’s family retain an awkwardly prominent position in the Tata ownership structure, with an 18 per cent stake in Tata Sons. And the ousted chairman’s public campaign has not been entirely fruitless.
Two state agencies are pursuing investigations into an alleged “criminal conspiracy”, involving bribery of state officials, at Tata’s Indian joint venture with Malaysian airline AirAsia: one of the claims Mr Mistry pursued most vigorously. Among the suspects named in an investigators’ preliminary report was R Venkataraman, a close aide to Mr Tata and current managing trustee of the Tata Trusts, which own two-thirds of Tata Sons. Mr Venkataraman, Tata Sons and AirAsia have denied any wrongdoing.
But even as Mr Mistry continues his campaign, company insiders say that the period of turbulence and uncertainty is now over. “It’s become a happening far away with very little implication on how people run the business,” one executive said. “No one even talks about it very much.”
Cyrus Mistry’s allegations: the court’s judgment
The key findings from India’s National Company Law Tribunal
Allegation: Mr Mistry’s sacking was illegal because it had not been included in the agenda for the board meeting in question, which breached the company’s articles of association. Moreover, a separate committee should have been formed to decide on the matter.
Ruling: The prior failure to include the matter on the agenda does not invalidate the decision, because it was not fundamentally fraudulent or against the interests of shareholders. The board of directors is entitled to remove the chairman and no separate committee is required.
Allegation: Ratan Tata sought unpublished price-sensitive information from Tata operating companies, in breach of insider trading rules. He also interfered in significant decisions by Tata companies.
Ruling: Mr Tata had the right to seek non-public information in his capacity as chairman of the Tata Trusts, which own a majority stake in the group holding company. His advice was given mostly upon request, and there was no harm in his giving suggestions. At no point did he attempt to block a decision taken by Mr Mistry.
Allegation: Attempts have been made to shield people responsible for fraudulent transactions at the joint venture AirAsia India, and to block legal action against two associates of Mr Tata who have enjoyed undue benefit from other Tata companies.
Ruling: Mr Mistry was aware of all investments made by AirAsia India during the period in question, and failed to provide the court with sufficient evidence to back his allegations around the company. There is no evidence of undue benefit to the supposed associates of Mr Tata.