The NCLT snub: Cyrus Mistry's Tata Sons war is a brave one but full of holes, because business failures need not be legal flaws

It is not surprising to hear that Cyrus Mistry has lost a crucial first round in a legal war with Ratan Tata, the man who ousted him as chairman of the Tata group. Astute observers may well describe the loss as “the Chronicle of a Defeat Foretold.” Yet, Mistry has chosen to appeal  against the verdict of the National Company Law Tribunal (NCLT) in a higher court, suggesting that a battle may be over but the war is not. [caption id=“attachment_3077404” align=“alignleft” width=“380”]  A file photo of Cyrus Mistry. AP.[/caption] The October, 2016 ouster of Mistry and his subsequent replacement by Natarajan Chandrasekaran as chairman of Tata Sons Ltd, the powerful closely-held holding company that indirectly runs or controls India’s cherished companies including Tata Motors, Tata Steel, Tata Consultancy Services and the like was by a brute 68 percent majority held by the Tata Trusts against Mistry’s own 18 percent. By trying to convert the numbers game into something legally untenable, Mistry has been essentially tilting at the windmills. A cynical observer would say his real objective is to embarrass the Tatas whose fame as a celebrated corporate brand known for probity within the Indian business context is quite substantial. By invoking factors including the articles of association of Tata Sons Ltd, and the alleged mismanagement by its board of a few Tata companies or initiatives during the tenure of Ratan Tata as Mistry’s predecessor and by seeing his ouster as an oppression of minority shareholders, Mistry’s lawyers may have built an emotionally strong case for the judges to hear, but some key points rankle. Whether it is a bad start for the Tata Nano car, debt-driven growth in Tata Steel, or the sale of stakes in Tata Teleservices, Mistry’s laundry list of failures often focus on business decisions that may be interpreted as bad – but it is not illegal to go wrong in business. And then, he starts on a difficult footing because Tata Sons, though a public limited company, is not a listed entity with a large number of institutional shareholders or the general public. As a result, there is no case for public grandstanding. Mistry’s lawyers have been essentially making before a panel of judges a case that is typically better off in a fiery annual general meeting (AGM) of shareholders where institutional votes matter. There is also the embarrassing question of what Mistry himself did or did not do while at the helm of Tata Sons on the issue of the built-in “oppression” by the majority that he speaks of. In a corporate game, the majority is a majority and the Tata Trusts spoke with clear numbers. It is well-known that the Mistry family’s uncomfortable entry into the Tata Sons board has a difficult history. The Tata group is also generally well respected in India. On both these counts, Mistry has been up against heavy odds. “Tata Sons is hiding behind the veneer of media management to present a rosy picture,” is a powerful social argument to make but judges look for legally disputable facts, not general innuendo, although it might swing things on the margins. Strange as it might seem, Mistry’s own conduct as seen by the tribunal’s observation that he leaked crucial information on the company to the media and the Income Tax Department does not create a positive impression. So, there is a ‘pot-calling-the-kettle-black’ imagery that settles in, even if one were to concede that Mistry’s intentions were noble. There is an unwritten law that those in high offices demit office gracefully, even if they have retributions in their hearts! To be fair to Mistry, his dour personal style, his priorities and circumstances were difficult  in his days as chairman of the Tata group because of a policy paralysis in India coinciding with a global financial crisis. Mistry is now out of the helm in leading listed Tata companies. Perhaps he is better off as an activist shareholder in these companies where he might pull weight from a larger body of shareholders, the way NR Narayana Murthy did in Infosys. Maybe that is what his long-term strategy is. (The author is a senior journalist. He tweets as @madversity)