How do you unscramble an egg called Tata Sons? The second law of thermodynamics says orderly things gradually turn more chaotic, and there's no going back, no separating yolks from whites.
But the appeals judge of India's corporate law arbiter thinks he can reverse time. Or so it would appear from his order declaring that Cyrus Mistry, deposed three years ago as executive chairman of the holding company of India's leading conglomerate, must be reinstated because ousting him was illegal.
Here's the messy business in a nutshell: The closely held Tata Sons, which sits in control of the $111 billion global empire spread across more than 100 firms, is 66 per cent owned by Tata Trusts, charities run by Ratan Tata. Mistry's family owns an 18 per cent-plus stake in Tata Sons. That equity has its origin in an unpaid $200 million loan the Tata family took in 1925 to save its then-fledgling steel business. The core dispute is whether the holding company is a quasi-partnership between the Tata Group and the 154-year-old Shapoorji Pallonji, or SP, Group, which is now run by Shapoor Mistry, the elder brother of Cyrus.
If it's a partnership, then Mistry gets to argue that his minority rights were suppressed. If it isn't, and he was just a professional CEO in a Tata enterprise, then the board was perhaps within its rights to fire him for nonperformance.
Justice Sudhansu Jyoti Mukhopadhyaya of the National Company Law Appellate Tribunal isn't new to controversies. He's the same judge who a few months back threatened to derail India's bankruptcy law by giving unsecured operational creditors the same rights to recovery as secured financial lenders. The Supreme Court struck down that order. In Wednesday's 172-page Tata-Mistry order, Mukhop-adhyaya and Justice Bansi Lal Bhat decided that Tata Sons is indeed a partnership.
At this stage, it's reasonable to expect that until India's Supreme Court gives a final verdict, Chairman Emeritus Ratan Tata will retain control of the group, which is now administered by Natarajan Chandrasekaran, a non-controversial technocrat who replaced Mistry as chairman.
However, none of the operating companies will be able to make any strategic decisions, at least four weeks.
It will be a repeat of the uncertainty following the October 2016 boardroom coup against Mistry
Given that the relations between Tata and Mistry are probably beyond repair, would Mistry even want to return to work at Bombay House? Perhaps not. However, he might want to retake his board seat, and the Mistry family would definitely want a reversal of what came after his dismissal: a change in the constitution of Tata Sons to a private limited company.
At the end of the day, this dispute is all about time. Cyrus Mistry is 51; in less than 10 days, Ratan Tata, who never married and has no children, will celebrate his 82nd birthday. If the final court verdict holds the core holding company to be a quasi-partnership with Mistry, the Tata name on the door may not survive him. That's how high the stakes are....