Ratan Tata-led Tata Sons has asked its operating firms Tata Motors, Tata Chemicals and Tata Steel to convene an Extraordinary General Meeting (EGM) of respective companies for considering and passing resolutions for the removal of Mr. Cyrus Mistry and Nusli Wadia as directors from these companies under Section 169 of the Companies Act.
Significant move This move is significant given that Wadia Group promoter Nusli Wadia, was once a close friend of Tata Sons interim chairman Ratan Tata. In the past few days, Mr. Wadia has backed Tata Sons ousted chairman Cyrus Mistry to continue as chairman of Tata Chemicals and Tata Steel along with other independent directors of the respective companies.
Tata Sons sacked Mr. Mistry as chairman of Tata Sons on October 24 and as chairman of its most profitable firm TCS on Thursday. It had also asked TCS to convene an EGM to remove Mr. Mistry as director.
“The whole initiative is to remove Cyrus Mistry. Wadia supporting Mistry didn’t go well with Tata Sons and so they have sought his removal also,” said Anil Singhvi, chairman of ICan Investment Advisors. “What’s the point of having independent directors on your board when you can’t respect their views,” asked Shingvi.
“The reasons for the removal of independent directors are not clear to the public,” said J.N. Gupta, co-founder and managing director of Stakeholder Empowerment Services. “In their notice to the operating companies, Tata Sons must have cited reasons for the removal. They may say that they lost trust in the independent directors as they were acting against the interests of the company. However, the directors will have a chance to defend their views before the shareholders as per section 169 and sub section 4,” Mr. Gupta said.
TCS clarifies Meanwhile, in a BSE filing, TCS said that Article 90 of the Articles of Association (AOA) of the company empowered Tata Sons to nominate the chairman of the board of directors, so long as Tata Sons, with its associates, held at least 26 per cent in the company. It now holds close to 74 per cent.
“In exercise of the powers under Article 90, Tata Sons Limited has nominated Mr. Ishaat Hussain as the chairman of the board of directors of the Company in place of Mr. Mistry. The provisions of the AOA are binding on the company,” it said in a statement.
