Within weeks of unlisted Tata Capital
writing off its massive loans given to Chennai-based entrepreneur C Sivasankaran, Tata Sons, the group's holding company, has also written off Rs 700 crore dues from the Siva group.
Sivasankaran is a close friend of group patriarch Ratan Tata and had played an important role during the fight between Tata and former chairman Cyrus Mistry
and Nusli Wadia.
As per Tata Sons
annual report of 2017, Tata Sons
was to get Rs 700 crore from Siva group
for the buyback of Tata Tele shares from NTT Docomo. But, after Siva defaulted to the payment in mid-2016, Tata Sons
had to buy back these shares from Docomo by paying from its own kitty.
In 2016, former Tata Sons
chairman Cyrus Mistry
had initiated legal action against Siva that triggered a series of events eventually leading to Mistry's removal in October 2016. With this, the Siva group
owes close to Rs 2,000 crore, including interest to the Tatas but with both Tata Sons
and Tata Capital
writing off these dues, the chances of Tatas getting this money is remote. While Mistry
was chairman, Siva group
had threatened to sue Tata Sons, Tata Tele and Docomo for mismanagement of Tata Teleservices, which failed miserably to make a mark in the telecom sector dominated by Bharti Airtel, Idea
In fact, it was Tata Capital
that gave loans to Siva group
to buy shares in Tata Tele but the latter defaulted as the value of Tata Tele crashed due to intense competition from incumbent players.
Interestingly, even after Mistry
pointing out these dues from Siva, both the board of Tata Capital
Financial Services and its auditor had given a clean chit to Siva. Mistry
had alleged that the company had incurred huge losses as the loans given to the Siva group
had turned bad.
In its annual report for the financial year ended March 2017, Tata Capital's board said, during the year, certain allegations were made in relation to the loans availed by Siva Ventures and Siva Industries and Holdings, firms promoted by C Sivasankaran from Tata Capital
and its subsidiary, Tata Financial Services that turned out to be untrue.
The auditor, Deloitte, also gave a clean chit to the firm without raising any qualifications on loans given to the Siva group.
The audit committee of the board reviewed the internal policies, processes, statutory requirements and the correspondence between the regulators and the firm.
“After due review and deliberations, the audit committee expressed its confidence in the company’s processes and due compliance with the applicable RBI (Reserve Bank of India) and Sebi (Securities and Exchange Board of India) Regulations,” the firm wrote to its shareholders.
The audit committee is chaired by independent director Janki Ballabh, former chairman of State Bank of India. Mistry
had alleged that the loan given to the Siva group
was under the strong advice of Tata Trusts executive trustee R Venkataramanan, which has since turned into a non-performing asset.
“All of this resulted in Tata Capital
having to recognise an abnormal size of non-performing assets,” Mistry
said in his letter to Tata Sons
board members and Tata Trusts trustees soon after his ouster in October last year.
However, in an interview to Business Standard Sivasankaran (Siva) had denied defaulting on Tata Capital
loans, saying the loans were covered by shares of Tata Teleservices as collateral. Siva also said the firm had defaulted on loans after it filed for bankruptcy and Tata Capital
wrote off the debt and kept the collateral.
In the annexures to his petition filed with the National Company Law Tribunal early this year, Mistry
had included his communication to N A Soonawala, a trustee of Tata Trusts, in early 2016 giving details of Tata group businesses which were facing headwinds. On Tata Capital, Mistry
had said there would be a diminution in the value of investments and loans that Tata Capital
pursued at the behest of the group. Mistry
had also written that the lack of appropriate culture and risk management systems led high NPAs.