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Tata-Mistry Row: What Transitions Will the Tata Empire Undergo?

Ratan Tata and Cyrus Mistry are now bound to be engaged in a tiresome legal conflict.

Updated
Opinion
4 min read
Tata-Mistry Row: What Transitions Will the Tata Empire Undergo?

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Tata Sons has ousted Cyrus Mistry from his position as chairman of the group, and it is obvious that a long legal battle awaits the empire. During this period of turmoil, the world will be watching the twists and turns that await Tata. Having closely watched and understood this group for several years, one thing I can tell you is that it will be a winding road ahead.

According to me, there are five things that we should focus on.

1. A Long Legal Battle

If Ratan Tata thought he could relax now that Cyrus Mistry is out of the way, then he’d be wrong. Tata and Mistry are now bound to engage in a tiresome legal conflict. In a move to prevent any legal order in the issue without both sides of the story being heard, both parties – Tata Group and Cyrus Mistry – have filed caveats in multiple courts and at the National Company Law Tribunal.

On Tuesday, Shapoorji Pallonji Mistry (18 percent shareholder in Tata Group) issued a statement denying any immediate legal move on his behalf as he is “currently assessing” the situation.

Gradually, reports of Mistry filing caveats poured in, and so did his rebuttal.

Since the decision to remove Mistry came from Tata Trust (66 percent shareholder), the Trust will have to place their grievances before the Charity Commissioner and explain how the company was suffering under his leadership. As it is a question of credibility, Cyrus too will have to defend himself.

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2. Big Boys (Big Lawyers) Bag the Big Cases

(Photo Courtesy: BloombergQuint)

Tata Group has pulled out the big guns, hiring lawyers ranging from P Chidambaram  to Harish Salve to fight their case. Cyrus isn’t far behind, having roped in Shardul Amarchand Mangaldas along with celebrated lawyer and Mistry’s father-in-law Iqbal Chagla. One thing is for sure, the upcoming days will see stories of Tata’s success tainted with news of mudslinging and conflict, meaning that shareholders will have to factor in all these developments.

3. Focus is on the Future of Tata Trust

Tata Trust is a charitable organisation, and Ratan Tata holds the reins. All the trustees of the organisation are his confidantes. However, most of these trustees belong in the older age group. In light of the concerns raised regarding the Tata Group’s heritage, a similar concern can be anticipated about the Trust itself. There is also bound to be public focus on the group’s heritage plans.

4. Who Will Be the Next Chairman?

The first sitting of the selection committee was held on Monday. Although the announcement of the new chairman will be made in four months, the buzz is that Ratan Tata already has a name in mind.

The selection committee is also likely to discuss the new structure of Tata Group. They could go with a new chairman and a CEO, or they could appoint two CEOs.

Noel Tata’s name is likely to resurface in this framework. Not only is Noel a Tata, but he is also Cyrus’ brother-in-law. This could make it easier for him to gain the approval of the Board.
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5. What is PM Modi’s Role in the War Between Tata and Mistry?

Ratan Tata wrote a letter to PM Narendra Modi on Cyrus Mistry’s ouster. (Photo: Reuters)

Ratan Tata’s announcement of writing a letter to PM Modi regarding Mistry’s removal and him temporarily taking over as interim chairman left many people puzzled. There were also reports suggesting that Mistry too had written a similar letter to the Prime Minister. Is this Ratan Tata’s way of saying that he is close to Modiji and has made his decision after taking the PM into confidence?

Government financial institutions play a major role in the Tata Group of Companies, so another reason for this move could be that Ratan Tata needs the full support of these institutions in this entire scheme of overturning authority.

One more reason could be traced back to Nano’s Gujarat plant. It is being said that the changes Cyrus had intended to make to this plant could have caused job losses. A job cut in Gujarat would have been bad news. In certain matters, the government too was impacted by Ratan Tata’s move to dethrone Mistry, which could be why Tata resorted to the unconventional step of writing a letter to the Prime Minister.

This is only a glimpse of the future. A few years from now, the feud will take another turn, when the Mistry family – which held 18.5 percent shares – will avenge this day by trying to take over the company.

Mistry is a builder from Mumbai. The battle between Tata’s corporate culture and Mistry’s builder culture will certainly be a sight to behold.

(Sanjay Pugalia is the Editorial Director of Quintillion Media and can be reached at @sanjaypugalia)

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