Nusli Wadia, chairman of the Wadia group of companies, has urged the Securities and Exchange Board of India (Sebi) to take action against three independent directors of the Tata group companies who he alleges made wrong declarations in annual reports.
The persons he has named are Tata Steel independent directors Andrew Robb and Mallika Srinivasan and independent director on both Tata Chemicals and Tata Motors Nasser Munjee.
In the eight-page letter addressed to Sebi Chairman Ajay Tyagi, Wadia said the regulator had not adequately addressed issues raised by him in his previous complaint filed on January 6.
Wadia requested Tyagi to conduct a “full and impartial investigation” under listing regulations on the reports submitted by the audit committees of the respective companies. He alleged that the regulator was relying on the audit committees, which was “illegal and unconstitutional”.
Citing the annual reports, which state that the audit committees had examined the charges made by Wadia and had filed their response with Sebi, Wadia said Munjee, who was the chairman of the audit committee of both Tata Motors and Tata Chemicals, was not independent and the committee, therefore, was “wrongfully and illegally constituted”.
“The audit committee of these companies, whose chairman though not independent, de facto and de jure, reported to Sebi that there has been compliance with all legal requirements and corporate governance standards,” Wadia wrote to Sebi.
Wadia said Sebi should disregard the statements of the companies and their respective audit committees made during the preliminary enquiry as these were clearly biased and prejudiced as the members of the committees were those against whom he had filed complaints earlier before Sebi. He added that their certificates amounted to nothing more than self-certification.
He pointed out that as the audit committees were constituted in violation of the Companies Act and the Listing Obligations and Disclosure Requirements they were not qualified to certify that there had been no violation on compliance.
An email sent to Tata Sons and Wadia did not elicit any response.
Wadia was also an independent director on the boards of Tata Steel, Tata Motors and Tata Chemicals till he was removed last December. After Cyrus Mistry’s ouster as chairman of Tata Sons on October 24, Wadia had supported Mistry. Along with Mistry, Wadia was also removed from all the boards of the Tata companies where he was a director.
Sebi has formed a committee on corporate governance where the role of independent directors is being discussed extensively. “The agenda is how to ensure independent spirit of the independent directors. There is a lot of criticism on whether the independent directors are really independent. This is a problem worldwide. All matters related to the role of independent directors are being discussed very thoroughly,” Sebi’s whole-time member S Raman had said last week.
Sources said Sebi also wanted the government to tighten rules relating to the removal of independent directors.
This is the second letter Wadia has written to Sebi. In the first letter dated January 6, he wrote as chairman of the nomination and remuneration committees of these companies and explained why each independent director had a direct conflict of interest.
Wadia has also attached an independent opinion of Justice B N Srikrishna along with his letters to Sebi.
Wadia said Robb received a remuneration of £190,000 from Tata Steel Europe, a subsidiary of Tata Steel, while he remained a member of the audit committees of both Tata Steel Europe and Tata Steel. “Had he been not classified as an independent director on the board of Tata Steel, he would not have qualified for appointment on the audit committees of both companies as independent director,” Wadia said.
Wadia said independent directors were allowed remuneration of only Rs 1 lakh and commission to the extent of only 1 per cent of net profits under the Companies Act.
On Srinivasan, Wadia said her husband, Venu Srinivasan, was a director of Tata Sons and also a trustee of the Sir Dorabji Trust, a disclosed constituent of the promoter group, holding a 28 per cent stake in Tata Sons.
“By virtue of the definition of ‘associate company’ under the Companies Act 2013, Tata Steel was an associate company of Tata Sons. Sir Dorabji Trust is a non-profit organisation that is a direct beneficiary and receives 25 per cent of its receipts in the form of dividend from Tata Sons. The Act provides clearly that the receipts by a non-profit organisation could be from the company concerned of any of its promoters,” he said. Mallika Srinivasan had a direct conflict of interest with Tata Steel, Wadia alleged.
On Munjee, who has been an independent director at Tata Chemicals since 2006 and at Tata Motors since 2008, Wadia said, “In February 2012, Munjee was appointed as a trustee of Ratan Tata Trust, which is a constituent of the disclosed promoter group.” He added that the trustees would be classified as promoters as the trust has been disclosed as promoter. “This being so, Munjee would be treated as a promoter and, therefore, cannot be an independent director.”
The Ratan Tata Trust holds a 23.5 per cent stake in Tata Sons and the trust and Tata Sons together hold 26.5 per cent in Tata Motors.
- Conflict of interest of IDs not adequately addressed by Sebi
- Urge to take action against three IDs
- Alleges that directors made wrong declaration
- Declaration a violation of Companies Act & Listing Obligations and Disclosure Requirements
- Alleges audit committee “illegal and unconstitutional”
- Report submitted by audit committee “biased and prejudiced”
- Asks regulator to disregard report, as it is only “self-certification”