Six degrees of separation: From starry-eyed start to messy finish, the anatomy of Tata-Mistry divorce

Here’s a summarised timeline of how the Tata-Mistry relationship came to this pass, from a starry-eyed start to a disgruntled finish.

Tata-Mistry separation: Boardroom battle in courtroom looking for an exit route
For two of India's premier business groups, September 22 marked the beginning of a bitter end to an association that had begun 70 years ago.

After four years of rough litigations, Shapoorji Pallonji (SP) Group on September 22nd said it would be exiting Tata Sons as minority shareholder. This is likely to bring the curtains down on the decades-long partnership between the two Parsi business families that had soured since the ousting of Cyrus Mistry in 2016.

The time between Mistry's entry and exit was marred with rifts, charges and legal battles, turning Ratan Tata's legacy-building decision of handing the reins to an outsider (a non-Tata) into an eventual courtroom nightmare for both the parties involved. Here’s a summarised timeline of how the Tata-Mistry relationship came to this pass, from a starry-eyed start to a disgruntled finish.


Chairman-in-law

In 2011, many were left witless when a 43-year old Cyrus Mistry — who at the time was primarily known for heading SP Group — was announced as Ratan Tata’s successor and the sixth chairman of one of the nation’s largest businesses.

It was well known that SP Group and Tata Group’s relationship existed outside of business too. During the long-drawn search for Tata's successor, there were expectations of Tata’s half-brother Noel Tata — who is married to Aloo Mistry, daughter of Pallonji Mistry — taking the reins, doing the rounds till before the day of the announcement.

Cyrus Mistry had joined the Tata board in 2006 after taking his father’s vacated seat, and during his time there had impressed Ratan Tata with his "quality of work, astute observations and humility". Many business insiders recounted the resemblance that Mistry had with Tata, pointing at similar temperaments and hobbies.
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In 2011, Tata in a statement said that choosing Cyrus Mistry as his successor was a "good and far-sighted choice". Over the next year, Mistry shadowed Tata before becoming Tata Sons Chairman in late 2012.

Paradise lost
The Tata Group had pushed hard for the youth to pave the way forward in leading positions during hiring and promotions in those years. "Be your own man" is what Tata advised the fledgling chairman while passing the baton. And that Mistry did.

The ultimate blow — which immediately preceded the unceremonious ouster and which many see as a direct factor behind Tata's ire — was Mistry’s June 2016 clearance for Tata Power’s $1.4 billion acquisition of Welspun’s solar farms without seeking the approval of Tata or other key shareholders.

"Tata Power is a cash guzzler but generates very little profit. Yet, when it’s embarking on its biggest buyout, a principal shareholder is kept in the dark. That’s unprecedented in Bombay House (Tata Group headquarters)," said an old-time group insider.
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But for some, Mistry was somewhat inept for the role from the very start. They perceived him as precocious and wayward to the group's core values. There was a clear disconnect between how Mistry and Tata operated with regard to the old cadre’s ethos and vision. Some even complained that letters questioning future plans sent to Mistry only got lukewarm responses, adding to a growing schism between the Tata Sons’ chairman and Tata Trusts.

Mistry’s decision to dispose of some Indian Hotels’ overseas properties, bundled with the move to shut UK steel operations, did not sit well with the latter. Tata Trusts believed that Mistry did not take shareholders and the group’s global ecosystem into account. "Tata was unhappy with the decision to shut down or sell the group’s steel business in Europe," said a person close to Tata. "He wanted the group to turn around the loss-making business rather than sell it."
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Other areas of discontent included legal battles with NTT Docomo, the collapse in negotiations with Vodafone, and the sacking of Indian Hotels MD Raymond Bickson. In a few cases, things got so out of hand that Tata himself would have to get involved to mediate. Furthermore, some began questioning the Chairman’s eye for talent. "The people he hired are not inspirational leaders, just individuals," said a former Tata Motors executive.

Coup d'état
Although Mistry's ouster came as a bombshell announcement, for insiders the decision was a long time coming.

According to sources, Mistry was not consulted regarding the appointments and was even offered an opportunity to resign beforehand, which he refused. The growing frustrations within the Tata Group were sure to end in confrontation, said Tata group insiders.

A day before the infamous Tata Sons board meet, a message was conveyed to Mistry from Tata Trusts Chairman Ratan Tata regarding what might be discussed in the meeting. On October 24th 2016, Tata Sons board announced the ousting of Mistry as Chairman, and Ratan Tata was named interim Chairman of the group. By February next year, Mistry was removed from the boards of all Tata Group firms.

Hell hath no fury, like a Chairman scorned
After the ousting, Mistry accused the board’s trustees of 'shadow control', alleging legacy issues in the group. Tata, on the other hand, justified the decision citing performance issues.

The days that followed saw accusations and counter-accusations intensify. Mistry denied the allegation outright that the board had not been consulted regarding Welspun Power acquisition.

Regardless, in early 2017, N Chandrashekaran — at the time TCS chairman — was named Tata Sons Chairman.

In December 2016, two Mistry family-backed investment firms — Cyrus Investments and Sterling Investments — moved the NCLT Mumbai alleging mismanagement and oppression of minority stakeholders by Tata Sons, further challenging Mistry’s removal by the company's board. At this point, Tata Sons served Mistry a legal notice alleging breach of confidentiality.

The Mistry family filed a contempt plea alleging that Cyrus’ removal was in violation of the court’s order under which the involved parties were not to initiate any actions against one another while the matter was under consideration. This ignited a back-and-forth court brawl spanning three years or so.

In March 2017, NCLT set the plea aside over maintainability issues, as the two investment firms didn’t meet the criterion of 10 per cent ownership in Tata Sons under the Companies Act. The Mistry family owns 18.4 per cent in the company, but the holding is below 3 per cent when excluding preferential shares. NLCT also rejected the firms’ plea seeking waiver.

Objection!
After a joust with NCLT that didn't go in their favour, the Mistry-backed firms moved the NCLAT, challenging NCLT’s order and the rejection of their waiver plea. During this period, a proposal to turn Tata Sons into a private company was passed by its shareholders in August 2017. NCLAT allowed pleas by the two firms seeking waiver, but dismissed Mistry's other petition on maintainability.

In July 2018, NCLT Mumbai also dismissed the pleas challenging Mistry’s removal and allegations of misconduct on Ratan Tata, saying it found no merit in these allegations on Tata group firms. Unfazed, the two firms approached the NCLAT against this order too.

A month later, Mistry approached the NCLAT in his personal capacity. NCLAT finally admitted the petition, and decided to hear it along with the main petitions filed by the two Mistry-backed firms. In May of 2019, the NCLAT reserved its order after completing the hearing and in December 2019, Mistry was restored as executive chairman of Tata Sons.

However, the NCLAT suspended implementation for four months to give time for the Tatas to file an appeal. And so they did, challenging NCLAT’s order in the Supreme Court, which stayed the order. Mistry claimed he did not seek to return as Tata Sons Chairman, but rather was protecting the Mistry family’s rights as a minority shareholder.

In July this year, Tata Sons said in a filing that financial performance and the company’s brand diminished under Mistry’s leadership. Mistry-backed firms pointed at Tata Sons turning into a private company amid the NCLAT hearing in their affidavit to the SC, which Cyrus had earlier claimed was gone under nefarious circumstances.

New normal
"The current situation has forced the Mistry family to sit back and reflect on the past, present and possible future for all stakeholders. The past oppressive actions, and the latest vindictive move by Tata Sons that impact the livelihoods of the wider SP Group community leads to the inexplicable conclusion that the mutual co-existence of both groups at Tata Sons would be infeasible," the SP Group said in a statement on September 22.

The SP Group has now made public its plan to sell its Tata stakes in order to raise capital. Tata Sons will now need to buy out the 18.37 per cent stake, which is valued at around $20 billion, bringing a possible end to the court battles and the 70-year long corporate partnership.
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