Tata Sons-Mistry spat shifts from boardroom to courtroom; erosion of share values of Tata companies continues

Investment firms controlled by Cyrus Mistry’s family moved the National Company Law Tribunal on Tuesday to protect their interests against the alleged mismanagement and oppression of minority shareholders at Tata Sons. This petition will be heard on 22 December effectively shifting the battle from the boardrooms to the courtroom.
Mistry’s late Monday evening announcement of his resignation from the boards of all listed Tata Group companies and his decision to pursue legal recourse starts a new chapter in the ongoing feud between him and Tata Sons. Blaming the ‘coercive behaviour’ of Tata Sons and terming the move as a ‘shifting of gears’, Mistry attributed his decision to be in the best interests of the Tata Group. This move comes after his ouster from the TCS board at the company's EGM earlier last week.

Mistry’s resignation pre-empts the need to convene EGMs of remaining companies where a resolution to remove him was to be considered. However, EGMs of Tata Steel, Tata Motors and Tata Chemicals will likely proceed as planned to consider the removal of Nusli Wadia (who got dragged into the dispute for supporting Mistry). Tata Steel’s EGM will decide on Wadia’s position later today.

A ‘logical conclusion’ to this spat may be still some time away, but the matter may yet serve as a precedent for similar corporate governance issues within Corporate India. Meanwhile, shareholders of the Tata group companies are left to deal with the value destruction caused in their portfolios since this issue became public on 24 October.



The seven Tata group companies, viz. TCS, Tata Motors, Tata Steel, Tata Chemicals, Tata Power, Indian Hotels and Tata Global Beverages have declined 6.1 per cent on an average since 24 October till date, underperforming the Sensex's 5.8 per cent decline over the same period.  The companies that saw the highest deterioration in market capitalisation were Indian Hotels, Tata Chemicals and Tata Motors which saw a 16.3, 9.6 and 9.4 percentage reduction in their respective share prices.