Cyrus Mistry ouster: Sebi looking into high profile Tata-Mistry saga for breach of corporate norms

28/10/2016

New Delhi: Markets regulator Sebi has begun looking into the high profile Tata-Mistry case for any possible breach of corporate governance norms and listing regulations at various listed companies of the over USD 100 billion conglomerate.
Besides, stock exchanges, late last evening, sought clarification from many of the group's listed companies on the purported disclosure by ousted Chairman Cyrus Mistry about Rs 1.18 lakh crore possible writedown at the group firms.
The Securities and Exchange Board of India (Sebi) is looking into the alleged disclosure made in the purported letter written by Mistry to Tata Sons' board members including about financial and other irregularities as also lapses on the corporate governance front, sources said.
The stock exchanges and the regulator are also keeping a close watch on the price movement and trading activities of over two dozen listed companies of Tata group, which have seen an erosion in value in last two trading sessions after the surprise ouster of Mistry in less than four years of being made chairman of Tata Sons, the main holding company of the group.
The price movement and trading volumes for few days prior to the surprise announcement will also be looked into.
The exchanges have asked these companies, including Tata Motors, Tata Steel, Indian Hotels, Tata Teleservices and Tata Power, to provide full details about these issues.
The notices from the stock exchanges followed reports about Cyrus Mistry, who was ousted as the chairman of the group's main holding company Tata Sons, disclosing possible writedown to the tune of USD 18 billion faced by the conglomerate.
The exchanges have asked the companies to provide "clarification/confirmation on the news item in detail".
The companies have also been asked to explain "whether such event/negotiations/article stated in published news were taking place?
In an explosive confidential email to Tata Sons board members, Mistry warned that the salt-to-software giant may face Rs 1.18 lakh crore in writedowns because of five unprofitable businesses he inherited.
Mistry said he inherited a debt-laden enterprise saddled with losses and went on to single out Indian Hotels Co, passenger-vehicle operations of Tata Motors, European operations of Tata Steel and part of the group's power unit and its telecommunications subsidiary as "legacy hotspots."
In a five-page letter/mail made available to the media, the ousted chairman of Tata Sons contended that he was pushed in a position of "lame duck" chairman. He also alleged of changes in decision-making process which created alternate power centres in Tata Group.
Mistry further said he was promised a free hand when he was appointed chairman in December 2012 but Articles of Association were modified, changing the rules of engagement between the Tata family trusts and the Board of Tata Sons.
Stating that he inherited problems, he went on to raise corporate governance issues alleging representatives of family trusts, which hold two-thirds of Tata Sons shares, were reduced to "mere postmen" as they left board meetings midway to "obtain instructions from Mr Tata."
On Monday, October 24th, the corporate world was stunned by the news that Tata Sons had removed Mistry as the chairman of the company and appointed Ratan Tata as the interim chief for four months.
While no clear reason was given, sources said it was in “long-term interest” of the company.
Then taking charge of the company on Tuesday, Ratan Tata inducted two new directors of the company, Jaguar Land Rover CEO Ralf Speth and Tata Consultancy Services (TCS) CEO & MD N Chandrasekaran.
He also called on the CEOs of group firms and asked them to focus on their business and not be distracted by the change in top leadership.
The company also filed a caveat in the Supreme Court, Bombay High Court and the National Company Law Tribunal against Cyrus Mistry moving for relief against his ouster as chairman.
Filing the caveat, Tata Sons and a Tata Trust, among others, said that they should be heard before grant of any relief to the ousted chairman.
Meanwhile, amidst reports that Cyrus Mistry would also filed a caveat against the Tatas, his office denied any such move from the company.
A statement from Mistry's office said, "A caveat is a notice filed by a party fearing legal action seeking notice before action. Tatas have filed caveats seeking notice from Cyrus Mistry fearing legal action. Cyrus has not filed any caveats. He has already made a statement that such concerns are misplaced at this stage."

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