In a shocking sensation to the business world, India’s Number One business conglomerate Tata Sons has ousted Cyrus Mistry as chairman and brought Ratan Tata back at the helm of affairs after the company lost a court case in a high-pitch battle in a case with erstwhile partner Japan conglomerate NTT Docomo.
While the case is poised to make a dent worth $1.17 billion from Tata Group, the Japanese company has asked Tata Sons to transfer the assets either in the US, the UK or any location outside India, said a report in Business Line.
Already, the Tatas have deposited $1.17 billion with the Delhi High Court citing Indian rules to pay the penalty amount directly to the Japanese company. Reportedly, Tata Sons is losing about ₹2 crore per day in interest.
Since transfer of assets outside India as sought by DocoMo is illegal both under the RBI guidelines and the New York Arbitration Convention, the company is neck-deep in the long-drawn battle with the Japanese. This is the first time that a Japanese company has moved for arbitration unlike other Japanese companies which had bowed out cursing their counterparts.
In fact, Cyrus Mistry was a choice of Ratan Tata after a 15-month search for his heir apparent to head the largest business house in India known for its century-long existence and adherence to Indian rules and ethics. He succeeded Ratan Tata as the group chairman in December 2012. The Tata Sons is a large shareholder of the listed Tata Group companies engaged in automobiles like Jaguar, Land Rover and steel mills to aviation and salt.
From salt to software, it has topped every sector it entered and won popular patronage but in telecom sector Tatas remained at the receiving end ever since they entered via Videsh Sanchar Nigam Limited, a government PSU they bought a decade ago.
Coming back to Mistry, he was a victim of the past decisions made by the Tata management which had hurriedly expanded the empire with little research and planning. Even the move to rope in Docomo was done during Ratan Tata’s days. Reports said Mistry was being sacked unceremoniously owing to his latest move to revamp the top management of Tatas and bring in younger faces.
The impact is likely to be known tomorrow as the markets were closed when the decision was announced by the group and market watchers are hoping that Ratan Tata’s return to the board as chairman should soothen the investors. “The impact will be a little softer with Ratan Tata taking over,” said Gaurang Shah, an analyst at Geojit BNP Paribas, in a TV interview, according to Reuters.
The press release of the company said a new selection committee was formed to choose a new chairman within the next four months. It comprises Mr Tata, Venu Srinivasan, Amit Chandra, Ronen Sen and Kumar Bhattacharyya, as per the criteria in the Articles of Association of Tata Sons. The committee has been mandated to complete the selection process in four months, it said.