‘Mistry has little room to manoeuvre legally’

The articles of association were amended in Dec. 2012

October 28, 2016 02:52 am | Updated November 17, 2021 06:24 am IST - MUMBAI:

An employee exiting Bombay House, the Tata group's headquarters in Mumbai. —  File Photo: Vivek Bendre

An employee exiting Bombay House, the Tata group's headquarters in Mumbai. — File Photo: Vivek Bendre

Ratan Tata, the interim chairman of Tata Sons, has left little to no room for ousted chairman Cyrus Mistry to manoeuvre legally, said sources in the legal fraternity. The changes in the Articles of Association (AoA), relating to the selection process of a chairman and the constitution of the selection committee, were added by a special resolution passed at an extraordinary general meeting (EGM) held on December 6, 2012, just before Mr. Mistry took the helm.

‘Weak footing’

“As far as articles of associations are concerned, Cyrus is on a weak legal footing with just 18 per cent holding in Tata Sons but that stake can technically create big problems for the Tatas going forward,” said a Mumbai-based lawyer, who did not wish to be identified.

Referring to the amendments to the AoA, Mr. Mistry had said in his email to the Tata Sons board that “inappropriate implementation” had created a flux in the decision-making process. “I have often presented to the trustees, before and after Tata Sons’ board meetings. This created alternative power centres without any accountability or formal responsibility,” Mr. Mistry had said.

The article in question relates to affirmative votes of a majority of directors nominated by the Trusts, which was passed at an EGM on April 9, 2014. The changes in the articles were done to give special powers to Tata Trusts, in nominating, approving and removing a chairman of the holding company.

Mr. Mistry, who was removed as chairman of Tata Sons on Monday, is yet to move court while Tata Sons has denied all allegations made by Mr. Mistry relating to questionable business decisions of Tata Sons, and has filed caveats at various courts and the National Company Law Tribunal to prevent Mr. Mistry from getting an ex-parte order against his removal.

‘All prepared’

“We have filed a caveat, just to ensure that there is no ex-parte order,” said Raian Karanjawala, Delhi-based solicitor for the Tatas. “Now, Cyrus will have to make up his mind for a legal battle. It’s premature to say if the matter will take an ugly legal turn as the matter has to come to the courts first. We have good lawyers and we are all prepared,” he said.

The Tatas have hired Karanjawala & Co. and Shardul Amarchand Mangaldas as legal advisors. Senior counsel Harish Salve and Abhishek Manu Singhvi are also advising Tata Sons.

Mr. Mistry is learnt to have hired Desai and Diwanji and former JSA Partner and Counsel Somasekhar Sundaresan for legal advice . Senior Counsels Virag Tulzapurkar and Janak Dwarkadas are also advising Mr. Mistry.

In his email, Mr. Mistry had said the articles of association had been modified, “changing the rules of engagement between the Trusts, the board of Tata Sons, the Chairman and the operating companies.” “Inappropriate interpretation” followed, severely constraining the group’s ability to engineer the necessary turnaround, Mr. Mistry had said.

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