Falling out of favour

The removal of Tata Sons’ chairman Cyrus Mistry cast a spotlight on an unfolding boardroom drama. But what are the legalities?

Nandini Lakshman finds out

Boardroom dramas are not new to India. Neither are they rare. But it is ironic when one of India’s largest and most revered corporate houses, which puts a premium on being low key, falls into an acrimonious corporate combat that unravels in the public eye.

“Boardroom battles depend on the items on the agenda,” says senior lawyer Suresh Talwar, who sits on the boards of many companies. “If a chairman leads from the front, he coaxes everyone to agree. At times, directors can say ‘note my dissent’, but still take it forward.”

But leading with such power is not always possible. On 24 October, barely four years into his job, 48-year-old Cyrus Mistry was unexpectedly dismissed as chairman of Tata Sons by the company’s board of directors.

The matter seems destined for the courtroom, but has played out very publicly before any court drama ensues. “Since the disputes are not formally being adjudicated by a court in India there is no risk whatsoever from a Contempt of Court Act perspective,” says Ameet Datta, a partner at Saikrushna & Associates.

He adds: “There is no bar to accurate reporting of facts and matters being adjudicated before a court or in reference to a court’s order/judgment.”

Mistry, whose family is the single largest shareholder of Tata Sons, the Tata Group’s holding company, with an 18% stake, was moved from an executive director position to a non-executive director as shown in a filing to the Ministry of Corporate Affairs the following day. This meant that Mistry would no longer be involved in the company’s day-to-day affairs.