Singhvi on why there's a case for class action suit against Tata

Cyrus Mistry, who was removed for Chairmanship of Tata Sons on Monday, wrote a scathing letter to Board members highlighting numerous issues plaguing the group companies.The problems highlighted by Mistry were already been talked about in hush tones and he just put them out in open, believes Anil Singhvi of Ican Investment Advisors. The main concern is for the minority shareholders who have not been given any concrete reasons for Mistry’s removal, he said. The company should have been more responsible in the way things were handled.Singhvi added that this makes a strong case for class action suit by the shareholders of the listed companies. Below is the verbatim transcript of Anil Singhvi’s interview to Anuj Singhal, Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Latha: First from a very market perspective should those who are holding Tata stocks be worried now that there can be possibly more mud-slinging and therefore more skeletons tumbling that will hurt the bottomline? A: What Cyrus Mistry has put down is basically the past. I don’t think the future is all that bad, so when you look at what has been done by Cyrus in last four years I think all Tata companies are doing much better than there were doing. In fact if you look at the market cap today it is far better than the past. So, let us not get unduly concerned about the past. We all know about Corus problem, we all know about Docomo, we all have ideas about Tata Motors Indian operations including Nano. So, I think what Cyrus has put down is essentially is in public domain, there is nothing new. He may have put down some numbers which are looking very scary, but this is what the past is all about. He was trying to do lot many things to correct that past, take some hard decisions and move ahead in life. So, I will not get unduly rattled by what Cyrus has put down. I think it is very honest opinion which he has expressed. He may be right or wrong, I think you have to give to the man that he has at least has the courage to put down what is there in public domain and people have been whispering about all this things, may not have talked very openly about it. He has for the first time talked openly about it, so I will appreciate what Cyrus has put down here that is what corporate governance is all about. Shareholders need to know; you can’t just shove under the carpet and say everything is alright. My larger point here is and I want to take a minute on this, my larger point here is that the concern of the minority shareholder is today of the listed company space in Tata Group is essentially the conduct of the Tata’s and Board. I think they have rattled this whole damn thing. They should have acted in a far more sensible and responsible manner on the Monday’s meeting. They knew it very well that if they really unseat it Cyrus Mistry as chairman, obviously the minority shareholders of all listed companies will be really rattled on that. They should have been far more responsible; they should have thought through, they said if they are doing this kind of a thing what implication would it have on the minority shareholders. Second issue that they have not yet, this is a third day. They have not yet spelled out why have they removed the Cyrus Mistry from being Chair person of the Tata Sons. Three days down the road if you do not come out and say that these are the reasons he continuous to remain as a Chairman of all listed companies. Again we have often have talked about eminent people who are on the board of Tata Sons, these eminent people also few on them run the listed companies. They know it very well that any action taken of this nature will be really scaring the minority shareholders. A common person doesn’t have any knowledge of what is going on here.Latha: Since you are a proxy advisor firm even if Tata Sons is in the private space, I mean so many of those directors were newly appointed and they voted against Cyrus Mistry. I mean one month into their position they voted against and the two guys were old members Farida Khambata and Ishaat Hussain they abstained. They knew him and they abstained and those who came in one month came to know that Cyrus Mistry was the wrong guy for the job. Given that position do you think people will now start wondering about the quality of all the Tata Boards of the listed companies and therefore will the stocks be marked lower?A: I think I will not extend it to the boards of all the listed companies without having any knowledge so I won’t create that scare. You have raised a very important point that these four people who came in only in August in October they take a view to unseat Cyrus Mistry from being Chair person without having any knowledge of what has happened in last four years. This letter obviously is an eye opener for them that they had no idea about what was going on here whether Cyrus was given enough support by the erstwhile Chairman on this matter or not. It is actually unbecoming of them on the Tata Sons Board and according to me they on their own they should resign today on moral grounds that they goofed-up on this issue without realising that they have created such a scare in the minds of the minority shareholders. I Think they have acted very recklessly and according to me as a champion of the minority shareholders and proxy advisor they is a fit case for even a class action suit by the shareholders of all listed companies that because of the action of the Tata Sons board and particularly this four person who just come in on the board for the last two months they have acted recklessly against the interest of minority shareholders and because of their actions last three days so much of market cap of those companies have come down. It is a very fit case for a class action suit because they have not yet made to public, to minority shareholders of those listed companies what was the reason for them to have taken a decision to unseat Cyrus Mistry. I think according to me if one has to test the class action suit in India this is a perfect case against those directors of Tata Sons who has yet not spelt out. People like Nitin Nohria he talks about corporate governance in Harvard Business School (HBS), he teaches there and what kind of corporate governance as he really projected here.We often get carried away by larger than life imagery of all these people, they actually came at the behest most likely for Rata Tata as it appears today from all the fact whatever fact which are we are engaged with. They came with an agenda so it is all mala fide. If you come out with an agenda without giving the person the chance to prove himself innocent or otherwise you just crucify him it is very uncalled for. Actually looking from the Tata Sons Board and Tata Sons is not a very pedestrian company. Tata Sons is one of the most iconic company we all are proud of. It is a national pride.Sonia: What do see as the reaction from the larger investor community the foreign investors, the guys who are very high on corporate governance when they take investment decisions? Now there is also the fear what the strategy will be once the new Chairman comes on board who the new Chairman will be. Do you see some amount of nervousness from the foreign community?A: I am seeing nervousness all around. I am not just talking about the foreign. In fact I am more concerned about it because Tata Sons is one company where shareholders have held shares in India for generations. This is not that you have bought the shares yesterday, this is a share which may have brought by my grandfather and I am carrying on that. So, more than the foreign shareholders I am concerned about the man of the street. There is a large community who believes Tata is a name about trust and faith. Now today that trust and faith has been completed destroyed by these people who came on to the board of Tata Sons without realising that Tata is a trust and faith, it is the legacy you just can’t be taking a decision even assuming that Cyrus Mistry was not found to be a very competent person even for a minute on that. This is the way to do it? Certainly not they just coming in and just unseat him, don’t give any reasons, you have rattled. What picture are we are projecting Tata Sons is the largest conglomerate in India what picture are we projecting globally on this. This is what India Inc is all known about. Then you have these four people coming, two of them are running listed companies what happen in to their own companies then. Latha: We cannot delve too much into that. We do not know the circumstances.A: My point is very simple we need to know because today as a shareholder of Tata listed companies I need to know why Tata Sons took that decision because Cyrus Mistry continues to be Chairman of my listed companies. If there are certain issues which Tata Sons is aware of it I need to know. I have lost my value for what. Last three days I have lost value of my shares because of what?Who is going to compensate me for the value destruction of last three days? So, according to me it is a fit case of class action suit against these peoples of Tata Sons unless they come out and tell me very clearly what was the reason for them to have sack Cyrus Mistry as Chairman. If they can’t explain they are liable for class action suit I am very clear in my mind.