Mumbai: In a shocking move on October 24, Cyrus P Mistry was asked to step down as Chairman of Tata Sons after serving four years. Ratan Tata has taken interim charge until the board appoints a successor to the position. The announcement came soon after a Board meeting at Tata Sons on Monday.
The 5-member board committee comprising of Ratan Tata, TVS Group head Venu Srinivasan, Amit Chandra of Bain Capital, former diplomat Ronen Sen and Lord Kumar Bhattacharya will now choose a successor to Mistry within the next four months.
Ratan Tata wrote to Prime Minister Narendra Modi informing about the new change in top management of the Tata Group. "A new management structure is being put in place and a selection has been constituted to identify the next chairman of Tata Sons," Ratan Tata wrote in the letter.
"The committee has been mandated to complete the process in four months. In the interim, the board has requested me to perform the role of Chairman and I have agreed to do so in the interest of stability of and reassurance to the Tata group," he added.
Ratan Tata was the Chairman Emeritus of the Tata group when he retired on December 29, 2012. He was the successor chosen by JRD Tata in 1991, who led the conglomerate for 21 years in a row.
In a report in NDTV, a board member said that the decision to remove Mistry was not new and was being planned since a few weeks. The decision to sack Mistry was ‘not based on pique’ but entirely on dismal performance.
Ratan Tata, in a letter to the employees, wrote that he would be returning as the chairman in the interest of stability and reassurance of the group.
The report also quoted an insider saying that the decision was not ‘deliberate’, but was brought up as a 'residuary' item, under the 'any other items' category, listed at the end of every board agenda. Mistry protested this move at the meeting, calling it an ‘illegal move’
Mistry was also pointed out that, according to the Tata rule book, he was given a 15-day notice period from the Board before bringing up such an item at the meeting.
The Board apparently responded to Mistry that they have a ‘legal opinion’ in support of the decision and when Mistry asked to see the opinion, the Board reportedly responded that the meeting wasn’t a ‘court hearing’.
At present, there are no reasons given for the change, but according to several reports, it is believed that Tata Sons was ‘unhappy with Mistry’s approach of shedding non-profit businesses’, including the conglomerate’s steel business in Europe.
After being sacked, Mistry was rumoured to move the Bombay High Court on Tuesday to challenge the decision made by the group. However, Cyrus broke his silence later rubbishing the rumours that he will move court challenging Tata's dismissal.
There is no basis "at this stage" for media reports that Cyrus Mistry is contemplating taking Tata Sons to court for abruptly sacking him as Chairman, the Shapoorji Pallonji group said.
"Neither the SP Group nor Mr Cyrus Mistry have made any statement yet. While the circumstances are being studied, there is no basis to media speculation about litigation at this stage. As and when a public statement becomes necessary, it would be made," said a spokesperson of the Shapoorji Pallonji Group, which is owned by Mistry's family.
Six out of the nine-member Board voted in favour of his removal. Mistry refused to be part of the process as he was the ninth member. However, Mistry still remains a member of the Tata board and continues as a Director of the company.
Update: Family has rubbished claims that Cyrus will move court....