Mumbai, Nov. 11: The battle of wills that has cleaved the Tata Group has spiralled into uncharted territory with Tata Sons, the holding company, calling for shareholders' meetings at Tata Steel, Tata Motors and Tata Chemicals to remove Cyrus Mistry and Nusli Wadia as directors of the three group companies.
Wadia is the first independent director to have been sucked into the controversy, which has raged since October 24 when Mistry was removed as chairman of Tata Sons and de facto head of the group.
Wadia was once regarded as a close friend of Ratan Tata. At one time, Wadia and Tata served on the boards of the operating companies in each other's group. Wadia has been an independent director of Tata Chemicals for decades.
In identical notices to the stock exchanges, the three group companies said Tata Sons had issued a special notice under Section 115 of the Companies Act 2013 to call for an extraordinary general meeting (EGM) of shareholders to vote on the resolutions, which will require a simple majority to come into effect.
Under the provisions of this section, shareholders holding a minimum 1 per cent of the voting rights in the company or shares worth at least Rs 5 lakh can issue a special notice to convene an EGM.
Tata Sons holds 29.75 per cent in Tata Steel, 26.51 per cent in Tata Motors, and 19.35 per cent in Tata Chemicals.
Sources within the Tata group were cagey about the reason for targeting Wadia, who had rallied the independent directors on Tata Chemicals' board yesterday to affirm their confidence in Mistry's leadership.
Corporate governance experts said that Tata Motors' articles of association give the right to appoint the chairman, deputy chairman and vice-chairman to the board of directors and not to Tata Sons. That is why the Tatas have decided to issue a special notice with a requisition to call an EGM to remove Mistry as a director.
TCS is one of the few companies where Tata Sons has the right to name the chairman as long as the holding company has more than 26 per cent in the software giant.
Bhaskar Bhat, a Tata group veteran, resigned as director of Tata Chemicals on Thursday after the independent directors of the company "unanimously" backed Mistry as its chairman.
Bhat said he was resigning as the company faced a loss of confidence in Mistry, chairman of Tata Chemicals, from Tata Sons.
In a letter to Mistry, Bhat added that several important issues of "discomfort", which he had expressed, had been ignored.
In his resignation letter, Bhat said: "I have just read the statement put out by the independent directors on the BSE website. The contents as well as the spirit of the statement completely dilutes the views I expressed at the board meeting today, especially regarding the threat the company faces on account of loss of confidence of the promoter Tata Sons in the chairman of Tata Chemicals.... Several important issues of discomfort I expressed seem to have been totally ignored. I, therefore, hereby tender my resignation as director of Tata Chemicals, with immediate effect."
Over the past two days, Tata Sons has requisitioned EGMs at TCS and Indian Hotels Company Ltd to remove Mistry as a director of these companies.
Independent directors of Indian Hotels, led by Deepak Parekh, too had expressed faith in Mistry's leadership but the Tatas are not looking to target the HDFC group chairman.
On Thursday, the Tatas had released a nine-page note in which they accused Mistry of orchestrating efforts to "take control of main operating companies of the Tata group to the exclusion of Tata Sons and other Tata representatives".
The note had said that Mistry had adopted a "clever strategy planned and systematically achieved over the last four years" of placing himself as the only Tata Sons representative on the boards of the operating companies.
"It was fair expectation that Mr Mistry would gracefully resign from the boards of other Tata companies on being replaced from the position of chairman of Tata Sons. This expectation was in line with convention, past practice, as well as Tata governance guidelines that were approved and adopted by Tata Sons under the aegis of Mr Mistry," the Tatas said in the note.