Private letter, recent affidavit show Tata-Mistry rift started back in 2013

According to an ET report, conflict of interest was one of the main sticking points for Ratan Tata

The rift between Tata Trusts chairman Ratan Tata and ousted Tata Sons chairman Cyrus Mistry began as far back as 2013, the Economic Times reported on Monday citing an affidavit filed by Tata before the National Company Law Tribunal (NCLT).

As reported earlier by Business Standard, Mistry had taken the legal route in his fight against the Tatas by filing a lawsuit in NCLT against Tata Sons in late December. According to sources, Mistry's family-controlled investment firms moved the NCLT in Mumbai against Tata Sons. The petition was against oppression of minority shareholders and mismanagement of Tata Sons under Section 241 of the Companies Act, the sources had told Business Standard. 

The affidavit, the ET report added, said that Mistry had not been able to turn around companies such as Tata Steel and Tata Motors, which resulted in a fall in dividends for Tata Trusts. Further, the affidavit stated that contrary to Mistry's claim – that Tata owns a minor stake in Tata Sons, while stakeholders like Mistry's investment firms actually suffer due to losses incurred by Tata Steel Europe – it was the Tata Trusts which held a majority stake in Tata Sons, far in excess of the stake held by Mistry's firms. Mistry's family owns 18.5 per cent of Tata Sons, while Tata Trusts — a philanthropic group of bodies endowed by the Tata family — own 66 per cent of the firm. 

Tata's 37-page affidavit said that the group had "faltered" in its judgement when it appointed Mistry as the chairman.

Another report from the financial daily also said that differences between Tata and Mistry might have been brewing since 2013. The report was based on private correspondence, accessed by ET, between the two. According to the report, Tata had written a letter to Mistry in September 2013, and asked the latter to ensure that there was no conflict of interest caused by his personal holdings in various group companies. The letter had urged Mistry to set up a blind trust – a trust which independently administers the private business interests of a person to prevent conflict of interest while he or she fulfils the obligations of their office, public or private – so as to disassociate him from his Tata shareholding. Further, the letter urged Mistry to ensure that there were no business transactions between the Shapoorji Pallonji Group and the Tata Group as long as he was the latter's chairman. The report, citing Tata's letter, said that Mistry had agreed to deal with any conflict of interest earlier and that this had been discussed by the selection committee. 

The report added that Tata had reminded Mistry by way of the letter that the former would do what it took to safeguard Tata Trusts' interests. Describing the matter as "fundamental", Tata's letter went on to say that if the matter was not resolved between Tata and Mistry, then it would "necessarily have to become an issue of a more public nature...". Mistry, according to ET, had responded in an email and assured Tata that he was also concerned about any possible conflict of interest. 

With the fight between Mistry and Tata continuing unabated, Tata Sons has called for an extraordinary general meeting on February 6 to oust Mistry from the board of the closely held firm, according to a company spokesman.