Both the Tatas and Mistry families would gain from a settlement

With Tata group choosing to approach the Supreme Court over the NCLAT order, the case is likely to drag on much longer than anticipated. What exactly are the contours of the issue and what looks like the road ahead for this ongoing battle between the Tatas and Mistry family?

NCLAT order and after

The case dates back to the year 2012 when Cyrus Mistry was appointed as the chairman of Tata Sons. Their relations go back a long way. The Mistry family holds an 18.2% stake in Tata Sons, which is actually much lower at around 2.5% if the equity and preference equity are considered. In October 2016, the Tata group voted to remove Cyrus Mistry from the post of Chairman. The contention was that he had acted in a way that was detrimental to the brand and the larger corporate interests of the Tata group. In a swift move, Mistry was sacked and Ratan Tata was appointed as the chairman of Tata Sons for an interim period before Chandra took over. Mistry had approached the NCLAT over his removal as being prejudicial to the interests of minority shareholders of Tata Sons. In this light, the NCLAT had recently passed an order declaring the removal of Mistry as unjustified and also the appointment of Chandra as illegal. It is this order that all the Tata group companies are individually contesting as being untenable and also being against the spirit of corporate democracy.

Tatas may have a point

According to the representation made by the Tata group some of the charges made by the NCLAT are based on a selective reading of the correspondence between Ratan Tata and Mistry. In fact, Mistry had alleged interference from Ratan Tata in the day to day functions of Tata Sons, although he was the non-executive chairman of the group. In addition, Mistry had also alleged that some of the investments were open to uncomfortable questions. The Tatas have alleged that Mistry had given room for conflict of interest by continuing to be involved in the family business. It was largely a concern over the culture misfit of Mistry within the Tatas.

Put an end to the fracas

Corporate battles are nothing new in India and most such battles have been sorted out amicably in the past. It would be in the larger interests off the Tata group to get this issue sorted out with the Mistry family across the table. As the Tata group has pointed out, it cannot afford to take rash decisions as it has a market cap of over $130 billion for the group and employs millions across India and abroad. The battle with Mistry is essentially a battle for control and that needs to be sorted out. At the end of the day, the Tatas are custodians of the brand. Mistry family has benefited substantially from its Tata investment. It may be time for amicable solutions!