Tata-Cyrus could be a talking point in Sebi board meeting

Board will be apprised on ongoing inquiry in Tata firms on alleged breach of corp governance norms

The alleged breach of corporate governance norms by the Tata group is likely to be a talking point at the board meeting of the market regulator Securities and Exchange Board of India (Sebi) scheduled for later this week. According to Sebi official, the issue is part of the board agenda, which also includes other items like easing of the municipal bond framework and allowing digital payments for purchase of mutual funds.

The Sebi board, which consists of finance ministry and Reserve Bank of India (RBI) officials, is likely to be apprised on the ongoing scrutiny of the listed Tata group companies. Recently, Sebi had shot off letters to three Tata companies seeking explanation on the allegations of breach in corporate governance and insider trading norms flagged by ousted chairman Cyrus Mistry.

Sebi is likely to consult the board, review the situation and take their feedback on further action as the issue as some of the allegations also involve other regulatory bodies, said an official.

The inquiry into possible violations gained significance after Nusli Wadia, former independent director at Tata Motors, Tata Steel and Tata Chemicals, also flagged corporate governance lapses and wrote to the Sebi chief U K Sinha.

Legal experts say the Tata group saga has brought to fore several unique circumstances, which may not have been thought of while framing the law. They add that the market regulator has to ensure there has been no abuse of power by the majority shareholders or promoters.

"There should be proper procedure for the removal of directors or chairman so that the majority shareholders don't misuse their power," said R S Loona, managing partner, Dhaval Vussonji Alliance, a corporate law firm.

"In case of Tata, it is possible that the directors were removed without any notice following a sudden meeting called by the company. I believe this kind of proposal needs to be taken to the board only after prior notice, which doesn't seem to be the case here," he said.

Incidentally, Sebi last week came out with a detailed guidance note for evaluation of boards of listed companies including the role of independent directors in order to provide more clarity for stakeholders.

However, the regulator did not mention any particular instance or company, it said the guidance note has been prepared to "guide listed entities by elaborating various aspects of board evaluation that may help them to improve the evaluation process, derive the best possible benefit and achieve the objective of the entire process".

Last month, Mistry moved the National Company Law Tribunal (NCLT) alleging oppression and mismanagement of minority interest at Tata Sons, a charge which the holding entity has contested. Both the parties have submitted their reply to the Tribunal as directed.