Nod then, malice now: Tatas

Mumbai: Tata Sons today accused its deposed chairman Cyrus Mistry of making "unsubstantiated claims and malicious allegations" against the conglomerate and its leadership, ratcheting up the war of words after Monday's dramatic boardroom coup. Bombay House had maintained a dignified silence yesterday after Mistry had fired off a five-page letter addressed to the company and trustees of the various Tata Trusts - and leaked to the media - protesting against his removal without giving him the opportunity to defend himself and questioning the group's corporate governance record. The trusts hold a controlling 66 per cent stake in Tata Sons. A day later, however, Tata Sons came out with a short, eight-paragraph note that said: "The tenure of the former chairman was marked by repeated departures from the culture and ethos of the group." "The strength of the group is not just confined to its value system and ethics in the board room but to a very large extent by the adherence to the values by its 600,000 plus employees whose spirit and cooperation has built the group to where it is today." "It is unforgivable that Mistry has attempted to be smirch the image of the group in the eyes of the employees," the note said. In his note, Mistry had charged 78-year-old patriarch Ratan Tata with inappropriate interference that had turned him into a "lame-duck" chairman with his powers severely circumscribed by modifications in the articles of association that redefined the rules of engagement between the trusts, the operating companies, the holding company and the group chairman. Tata Sons said that as executive chairman of the group, Mistry had "been fully empowered to lead the group and its companies". Reports suggest that the modified articles of association gave the two principal trusts - Sir Dorabji Trust and the Sir Ratan Tata Trust - the right to nominate one-third of the number of directors on the Tata Sons board. The chairman of Tata Sons could be removed only if there was a simple majority in favour of such a proposal and if all trustee nominees also backed it. The changes were made in April 2014. Mistry was removed from his post after six directors, including the three trust nominees, voted in favour of the proposal. Two abstained and Mistry voted against it. "It is unfortunate that it is only on his removal that allegations and misrepresentation of facts are being made about business decisions that the former chairman was party to for over a decade in different capacities. The record, as and when made public, will prove things to the contrary," the note added. Mistry had accused Ratan Tata of making a series of bad business bets that he refused to unwind when they went horribly wrong, leaving him to grapple with the prospect of a write-down of Rs 118,000 crore (about $18 billion) on five unprofitable businesses. The Tatas said it was beneath their dignity "to engage in a public spat with regard to the several unfounded allegations appearing in his (Mistry's) leaked confidential statement". "There is a multitude of records to show that the allegations made by Cyrus Mistry are unwarranted and these records will be duly disclosed before appropriate forums, if and when necessary, sufficiently justifying the decision made by responsible boards of directors, of Tata Sons and its group companies," the Tatas said. The Tatas are clearly preparing for a long court battle ahead and have trawled the voting records of Mistry on Tata Sons board decisions since 2006 when he became a director. Abhishek Manu Singhvi, a senior lawmaker from the opposition Congress party and lawyer who has been retained by Tata, told a television channel that the records would show that Mistry had never raised any misgivings about the transactions that he had criticised in his five-page letter yesterday. Singhvi defended the change in the articles of association on the ground that this was the first time where the chairman of Tata Sons was not the chairman of the trusts as well. The modifications were designed to protect their interests, he contended. On Tuesday, V.R. Mehta, one of the trustees of the Sir Dorabji Tata Trust, said the Tata Trusts were deeply concerned over the weak performance of the group companies. "Only two or three companies were earning big profits and that had an impact on our returns in the form of dividends from Tata Sons," Mehta had said. It got to a point where the trusts were worried that they might have to downsize their philanthropic activities. The Tata note said Mistry had been removed from the post of chairman because he had "overwhelmingly lost the confidence of the members of the board of directors for a combination of several factors". The letter said the Tata Trusts were alarmed by the "growing trust deficit with Mistry" who had chosen not to address their concerns about certain business issues. Ratan Tata met the Life Insurance Corporation's acting chairman V.K. Sharma but what they discussed could not be ascertained. There is a growing sense that the Tatas could soon move to remove Mistry from the post of chairman in several group companies like Tata Motors, Tata Steel, Tata Power and Indian Hotels. LIC holds a 13.62 per cent stake in Tata Steel, 13.12 per cent in Tata Power, 8.76 per cent in Indian Hotels Corporation Ltd, and 5.20 per cent in Tata Motors - and could prove to be a powerful ally in any board-level skirmish. On Thursday, Tata Group companies listed on the bourses said they were in full compliance with accounting standards and rubbished Mistry's letter that spoke about a massive write-down of assets. Tata Group stocks were battered for the third day, gouging Rs 26,000 crore worth of their combined market valuation this week. Software exporter TCS was the only one that bucked the trend and rose 0.68 per cent on the Bombay Stock Exchange. Tata Motors tumbled 1.44 per cent, Tata Power fell 1.36 per cent and Tata Steel dipped 0.44 per cent.