When Cyrus Mistry chalked up a shock victory in Tata feud

Cyrus Mistry

Cyrus Pallonji Mistry was a reluctant Chairman.

After all, he was not even one of the candidates when the Tata Sons selection committee first drew up a list of possible successors of Ratan Tata, whose term was ending in December 2012.

But when the committee, despite interviewing several candidates within and outside the Group, failed to find a worthy successor to Ratan Tata, Mistry’s name came up. He ticked a lot of boxes.

It had taken some bit of persuasion from the Tata icon himself to convince Mistry to take up the responsibility to lead the conglomerate. But once in, Mistry is said to have taken up the top job in earnest.

Fast forward to October 2016. Mistry was also a reluctant fighter.

Though he had been just ousted as the Tata Sons chairman,  Mistry’s first instinct was not to wage a war. But the opinion changed as the spat became increasingly toxic and played out in the public.

While Tata Sons charged Mistry with misleading the company to get selected as Chairman, retracting on promises and concentrating powers, the ousted chief said he was made to be felt like an ‘outsider,’ and went on to raise serious corporate governance issues at the Group.

Mistry, despite out of the corner office at Bombay House, continued to remain in the Board of several Tata companies. And then - advised by his family - he went to the courts. He was eventually forced out of all the Tata companies.

Two months after his exit from Bombay House top post, in December 2016, Mistry family’s two investment firms, Cyrus Investments and Sterling Investments Corporation, moved NCLT challenging his removal from Bombay House, and alleging oppression of minority shareholders and mismanagement by Tata Sons.

The battle, which played out in on the front pages initially, soon lost some of its interest, as it looked like the Tata side had managed to wrest its position in the courts. The NCLT in multiple hearings dismissed arguments made by the Mistry firms. In July 2018, it dismissed Mistry’s plea against his removal.

Though he appealed against the order at the NCLAT, which concluded its hearing in May this year, it appeared that the Tata Group would yet come out on top yet again in this corporate battle.

That is why the December 18 order from the NCLAT, evoked extreme emotions. While the Tata camp is said to have been shocked, and even speechless for some time, the Mistry side “was surprised.” Says an executive close to Mistry: “We were prepared for both. Still, the verdict is a pleasant surprise.”

In his statement, Mistry took the moral high ground. “Today’s judgment is not a personal victory for me, but is a victory for the principles of good governance and minority shareholders…is a vindication of my stand.”

The Tata Group, on the other hand, was circumspect, and also underlined its surprise at the decision. “The NCLAT order appears to even go beyond the specific reliefs sought by the Appellant,” the Group said, likely referring to the fact that Mistry had only wanted to be reinstated as director, and not as group chairman.

While the Tatas will approach the Supreme Court and appeal against the NCLAT order, it will be intriguing to watch out what Mistry does, irrespective of what the apex court decides.

“He had always maintained that he is not after the chairman post,” said an executive close to him. Even if he doesn't return at the corner seat, both Mistry, and his family, will look to get back the Director chair at Tata Sons.

The spat

The exit had preceded months of simmering differences between Mistry and Ratan Tata.

The difference had initially caught the industry by surprise, as Mistry had spent a year under Tata in the transition period, before eventually taking over at the helm. The two also had close family ties that go back over a century. One of Mistry’s sisters is married to Noel Tata, Ratan Tata’s half brother.

The differences were professional, and were across layers. It mattered that even as Mistry chaired the Group, Ratan Tata continued to head the Tata Trusts, the custodian and the largest shareholder of the conglomerate.

What were the differences about?

One, on strategic decisions. These included the future course for Corus, which was later renamed Tata Steel Europe. The $13 billion acquisition was led by Ratan Tata, but was done in later for several reasons, including adverse economic conditions. It was clear that while Mistry wanted to sell off the units, Tata wanted to give it more time.

The two also differed on the Tata Nano, a dream project of the group patriarch, who also didn’t approve some of the initiatives by Mistry in consumer space. This included plans to tie up with US pizza chain Little Ceasars.

The two also had differing views on some key appointments, especially in Tata Sons.

Moral high ground

A few weeks after the December 18 verdict, Mistry in a statement took the moral high ground and said he was not interested in the chairmanship of Tata Sons. Instead, he said, the fight was about the rights of the minority shareholders.

Fast forward to September 22, though, the Supreme Court ruling is a setback for the family's efforts to meet debt obligations. The Supreme Court on Tuesday ordered a status quo on the transfer or pledging of Tata Sons shares by the SP Group companies.

The Mistry family now has indicated that it is ready to come to the negotiating table, and look at a separation with the Tatas. From the courts, the action may now again shift to the Bombay House. Will the two families agree to separate?