Each day the quagmire the Tatas have got themselves into with the dismissal of the 48-year-old Cyrus Mistry, the former chairman of Tata Sons, is sinking further eroding the name and honour that was synonymous with the Tatas and the 148-year-old group.
According to media reports, a slew of developments over the weekend has further proved that the mess is only getting stickier for the Tatas and independent directors of various group companies are likely to hold the key to the issue in the coming days.
An indication of this came last week when independent directors of the group's hospitality arm, Indian Hotels Co (IHCL) endorsed Mistry's leadership while expressing unanimously full confidence in him.
The independent directors, including banker Deepak Parekh and Nadir Godrej, met ahead of the Tata group's loss-making company's board meeting and reposed faith in Mistry, who had been ousted as chairman of holding company Tata Sons on October 24.
The development is important as this comes even as Rata Tata is trying his best to oust Mistry from his positions in the operating group firms, including IHCL and Tata Motors.
"The independent directors unanimously expressed their full confidence in Chairman Cyrus Mistry and praised steps taken by him in providing strategic direction and leadership to the company," Indian Hotels Co Ltd (IHCL) said in a BSE filing.
IHCL's independent directors also include Gautam Banerjee, Keki Dadiseth, Vibha Rishi and Ireena Vittal. The board of IHCL met after the meeting of the independent directors and approved the financial results for the second quarter ended September. The meeting was chaired by Mistry.
However, a report in The Times of India, has said that the Tatas may even question the independence of some IHCL directors.
"While praising performance under Mistry, we wonder if they asked themselves what would happen if the Tatas withdrew all the guarantees executed in favour of IHCL. Will it be the same if IHCL were to become a Mistry group company?" a Bombay House insider has been quoted as saying in the ToI report.
The insider remark in the report is quite unlike the Tatas. "When a decision is taken that goes against Tata Sons, then the independence of independent directors will be questoned. Is that how they see a panel of eminent people in their own right having come to a decision," asked an analyst. He said that saying that, `what would happen if the Tatas withdraw all the guaranteed executed in favour of IHCL is tantamount to issuing a threat. I thought only politicians had foot-in-the-mouth syndrome," he said.
When a majority of Tata Sons voted in favour of ousting Mistry, questions were raised on their action. Mistry referred to the same in his letter to the board when he pointed out that a few members of the board had `lauded and commended' his performance recently. "No independent director wants to face that again," said the analyst.
Meanwhile, a report in the Business Standard, has said that the happenings at the IHCL board meeting has given hopes to the Mistry camp that they can replicate the success at other board meetings that are pending now.
Mistry is chairman of six other listed Tata companies, with the board meetings of Tata Chemicals and Tata Steel slated for 10 and 11 November, according to the BS report.
Tata Chemicals has four independent directors and Tata Steel has six, says the report, listing out them as follows: Nusli N Wadia (Tata Chemicals, Tata Motors, Tata Steel), Mallika Srinivasan (Tata Global, Tata Steel), OP Bhatt (Tata Steel, TCS), Sbubodh Bharagava (Tata Motors, Tata Steel), Nasser Munjee (Tata Chemicals, Tata Motors), Ireena Vittal (Indian Hotels, Tata Global) and Vibha Paul Rishi (Indian Hotels, Tata Chemicals).
A report in Times of India today points out that Wadia, chairman of Britannia Industries Bombay Dyeing, is likely to the key driver in shaping the opinion of the independent directors. The report says while Wadia and Ratan Tata have been friends for long, the Tata group's entry into aviation through Vistara and Air Asia India may have spoilt their good equations. Wadias have a presence in aviation through GoAir.
Manoj Kumar, founder of Hammurabi & Solomon and a visiting fellow with the Observer Research Foundation, is of the opinion for Tatas to get the independent directors to vote in their favour is possible only if they are able to present critical issues that can affect business interests if Mistry continues to remain the chairman.
Independent directors are not pre-committed to a view of either side – the Tatas or the Mistrys.
“The voting pattern of each board would be different. The pressure is far more on the Tatas. They have to raise the issues and recalibrate them in the commercial domain. The Mistrys have to only rebut what is being raised by the Tatas. However, the independent directors have to listen to the issue and come out with reasonable views as this could be tested in a court of law, if it is taken to court,” said Kumar.
However, chances are that the Tatas could lose their case with the independent directors. The IHCL board meeting is a learning curve for the Tatas to raise issues that affect stakeholders, promoters and company interests, added Kumar.
"The Tatas could lose this battle," says J N Gupta, former ED, Sebi. "If they are able to point out critical reasons that the boards of companies on which Mistry is currently chairman will be affected because of his presence, they will not be able to win this battle."
Is the Tatas up for this? Remember, communication has been a weak link for the Tatas. And if a report in the Mint newspaper today is to be believed, the Tatas have not yet informed the independent directors about the reasons why Mistry has been sacked from Tata Sons.
One of the independent directors has told the newspaper: “We too are groping in the dark.”
Clearly, if the Tatas do not change the way they function, the present mess is going to tarnish their image for many years to come.