On the eve of 24th October, after the markets closed, Tata Sons Ltd issued the statement that its Board has replaced Cyrus Mistry as Chairman, and that previous Chairman, Ratan Tata, would preside as the interim Chairman, while a search panel had been constituted to find a new one. This unexpected move has taken the community and the nation by surprise. Not surprisingly, the past week has been witness to attacks and counter-attacks between the nation’s largest business conglomerate, the Tata Group and ousted Chairman Cyrus Pallonji Mistry. Cyrus Mistry had taken on the mantle of Chairman of Tata Sons (the holding company of the Tata group of companies), India’s largest business conglomerate, after Ratan Tata stepped down in 2012. He was chosen based on his representation from Shapoorji Palonji Group, the largest shareholder in Tata Sons, as also his astute business acumen. He had joined the Board of Tata Sons in 2006 after his father, construction tycoon and Shapoorji Pallonji Group Chairman, Pallonji Mistry, retired.

Though Ratan Tata is yet to address this decision, VR Mehta, Trustee of the Sir Dorabji Tata Trust, in an interview with NDTV mentioned that the Tata Trusts were “concerned about falling revenue (since Mistry took over)—funds for charitable work were drying up”. They were also concerned that the performance of Tata Sons was increasingly dependent on just two companies—Jaguar Land Rover (JLR) and Tata Consultancy Services (TCS). Additionally, Tata Trusts were of the view that the group under Mistry hadn’t considered the sensitivity of shareholders or the global ecosystem. The decision to shut down the Tata Steel business in UK came in to criticism in Britain and wasn’t in line with Tata. Some analysts believe he could have handled the group’s spat with Tata DoCoMo better, while some insiders claim that Mistry was aloof and not communicative enough.

In his defense, Cyrus Mistry claimed his dismissal was illegal and invalid, by stating that he “had overwhelmingly lost the confidence of the board…for a combination of several factors.” He has said that he inherited a lot of problems. He has questioned a number of his predecessor’s decisions including those about the entry into aviation, the aggressive bidding for Tata Power’s Mundra power project, and the decision to continue with the Nano car, to name a few. He is known to have made the statement that he was unable to function freely given Ratan Tata’s interference. In an email to the directors of Tata Sons, he expressed shock and disappointment saying that two members of the nomination and remuneration committee of the board, who had recently lauded and commended his performance, now voted for his removal! However, there are two major points which raise eyebrows in his email. Firstly, the Tata Group is staring at a Rs. 1.18 trillion writedown (i.e. two-thirds of the group’s net worth of Rs. 1.74 trillion!); and secondly, he has emphasized and pointed out instances of corporate governance violation in the organisation.

The company has rejected Mistry’s claim of predecessor’s interference, changes in the holding company’s articles of association, and the creation of “alternative power centres” had reduced him to the “position of a lame-duck chairman”. They say Mistry was “fully empowered” and enjoyed “complete autonomy” to manage the group, and was disappointed with Mistry for leaking “communication marked confidential…in an unseemly and undignified manner”.

Of course, opinion is divided. For our community, this goes beyond being just a corporate issue to see two of our leading icons getting involved in this unfortunate dispute. While some are elated to have Ratan Tata back, the others feel the ouster was unnecessary and even unjust, especially in keeping with the way it was conducted. The big question now doing the rounds is will the next Chairman be Parsi, in keeping with tradition of having only Parsi Chairmen right from the time that the organization was founded by Jamsetji Nusserwanji Tata (1868)? Also, will this clash be settled gracefully or should the community brace for an unpleasant, long-standing legal battle? Only time will tell…