What Tata Sons Got All Wrong - By Cyrus Mistry's Legal Team

Published: December 10, 2016 07:06 IST
A recent article written by one Sidharth Sharma, claiming to be a legal adviser to the Tata Group, unsurprisingly, much like his client's statements, is full of half-truths and relies on selective and distorted facts, in arguing that Mr. Mistry has acted as an "irresponsible whistleblower".

However, as a lawyer, Mr. Sharma's reasoning strains credulity. Mr. Sharma argues that the legality of the decision to remove Mr. Mistry can be questioned only on the procedure adopted, but the merits of the decision itself cannot. The reasoning is flawed. Decision-making processes and procedures do not exist in a vacuum. They exist to ensure a fair and just outcome. If due process is given a go by, it strikes at the root of the decision itself. That Tata Sons gave due process a go-by is evident. The Articles of Association of Tata Sons provide for the constitution of a selection committee before the removal of a chairman and the appointment of a new one. None was formed. No notice or agenda was circulated in advance of the meeting for the proposed removal of Mr. Mistry. Mr. Sharma conveniently chooses to ignore these inconvenient facts. 

Mr. Sharma then argues that no reasons or explanations need to be given for the removal of Mr. Mistry since that is a matter for the Board of Tata Sons. In his and his client's world view, the directors on the Board of Tata Sons, which is the promoter and major shareholder of several listed companies and shapes the future of numerous stakeholders, can merrily abandon their fiduciary duties to think and act independently and owe nobody an explanation for their actions. These stakeholders, if Mr. Sharma is to be believed, deserve no more than a "dignified and measured" online communique that Mr. Mistry had been "replaced", when the Board of Tata Sons had only months before lauded his performance as a Chairman.

At a time when corporate governance standards and duties of directors and controlling shareholders are being expanded, Mr. Sharma's advocacy of arbitrary and unreasoned actions is troubling. One is reminded of Lord Atkin's observations in Liversidge v Anderson that such "arguments might have been addressed acceptably to the Court of the King's Bench in the time of Charles I." Indeed, these arguments bear close resemblance to the views of despots and dictators rather than the Tata Group which professes the highest standards of corporate governance. 

The merits of a "corporate decision" such as the removal of a Chairman or a director can legitimately be questioned if due process has not been followed. The law requires the removal of a director to be voted upon by the shareholders. In order for the shareholders to take an informed decision, is it not the duty of the Board to provide reasons for why the director is proposed to be removed? The right to make informed decisions is integral to the notion of fairness and not some idealistic principle. 

Mr. Sharma then makes a rather startling argument. He takes umbrage at the fact that Mr. Mistry carried his fight to the listed operating companies rather than questioning his "removal from the Board of Tata Sons" which would have been "understandable". First, Mr. Mistry has not been removed from the Board of Tata Sons. He has been removed as its Chairman and continues to be a director, a distinction that Mr. Sharma as a lawyer ought to have been aware of. Second, it is Tata Sons that has requisitioned an extra-ordinary general body meeting to remove Mr. Mistry as a director of the operating companies, far from Mr. Mistry taking the fight to the operating companies.

Mr. Mistry was appointed as the Chairman of the Boards of the operating companies as a result of him being appointed as the Executive Chairman of Tata Sons. His appointment as a director of the operating companies was approved by shareholders including Tata Sons. Mr. Mistry has in fact served on the Boards of several operating companies even prior to his appointment as the Chairman of Tata Sons. Any director appointed by the shareholder must act in the best interests of the company and not at the whims of the shareholder who appointed him. Therefore, merely because Mr. Mistry was removed as Chairman of Tata Sons, it cannot be a ground to seek his removal as a director on the Board of the operating companies. It is apparent that Mr. Mistry's removal has been sought owing to his willingness to exercise independent judgement, rather than following the whims of the Trustees of the Tata Trusts or Mr. Ratan Tata. Mr. Sharma conveniently cites "long standing convention" when every convention was cast aside by appointing Mr. Ratan Tata, discarding Tata's own retirement policy. 

Mr. Sharma then argues that making Mr. Mistry out to be a whistleblower is "comical" owing to what he believes are "selective" and "petty" instances of Mr. Mistry leaking "specific instances" of decision making which according to him, amount to "egregious" breach of confidentiality. There is nothing "comical" about fraudulent transactions being suppressed and FIRs being filed or price-sensitive information being communicated in violation of securities laws. If at all these were "selective" and not based on facts, Tata Sons ought to have come out with specific facts on why Mr. Mistry was wrong. Not a whisper is contained in press statement after press statement issued by the Tata Group or their paid advertisements which only underscores the need for a thorough investigation into Mr. Mistry's claims. 

It is evident that Mr. Sharma's position as a legal adviser to Tata Group precludes him from articulating an independent and objective view of his client's conduct. Indeed, anybody articulating such a view runs the risk of being threatened with defamation notices for "Anti-Tata Activity". Mr. Sharma's compulsions for expressing the views he has, are, therefore, entirely understandable. 

(The authors are Advocates based in Mumbai and part of Cyrus Mistry's legal team)

Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.

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