Tata Sons removes Mistry from TCS; Ishaat Hussain interim chairman TCS

A source close to Mistry, however, challenged Hussain's appointment, saying the TCS board needs to approve it

The boardroom battle between Tata Sons and Cyrus Mistry entered a new phase with the former removing Mistry from the chairman's role at India's largest IT services provider Tata Consultancy Services (TCS). Tata Son.s which holds 73.33% stake in TCS. has appointed Ishaat Hussain, as the interim chairman of the company with immediate effect.

In a BSE filing the TCS said: "The Company has received a letter dated November 09, 2016 from Tata Sons Limited nominating Mr. Ishaat Hussain as the Chairman of the Board of Directors of the Company in place of Mr. Cyrus P. Mistry with immediate effect. In view of this, Mr. Mistry has ceased to be the Chairman of the Board of Directors of the Company and Mr. Hussain is the new Chairman of the Company."

The company has been further informed that Hussain shall hold office as chairman of the company until a replacement is appointed in his place, said the BSE filing. Tata Sons has issued a special notice under Section 169 read with Section 115 of the Companies Act, 2013 and a requisition for convening an extraordinary general meeting of shareholders of the Company under Section 100(2) of the Companies Act, 2013 to consider a resolution for the removal of Cyrus P Mistry as Director of the Company.

The sudden announcement of Mistry's ouster from the chairman's role at TCS also comes with the recent development of Tata Sons requesting for an shareholder meeting of Indian Hotels, and today Tata Chemicals board is also meeting to consider the September quarter results. In addition to this, an e-mail from Tata Sons talks in details about Mistry's performance in the last four year also commented that he should have resigned from individual companies board voluntarily. 

"Mistry conveniently forgets that he was appointed as the Chairman of the Tata operating companies by virtue of and  following his position as the  Chairman of Tata  Sons. Therefore, it was fair expectation of Tata  Sons that Mr. Mistry would gracefully resign from the boards of other Tata companies on being replaced from the  position  of the  Chairman  of Tata  Sons. This  expectation  was in  line  with convention, past practice as well as the  Tata  governance Guidelines that  were approved and  adopted by Tata  Sons under  the aegis of Mr. Mistry. However, his departure from these requirements and  conduct since his replacement as Chairman of Tata Sons demonstrates his absolute disregard of longstanding Tata traditions, values and ethos," said the e-mail.

Meanwhile, a source close to Mistry are attributing the action taken in case of TCS as hasty and against the rules in Companies Act. "Tata Sons had asked TCS yesterday (November 9) that it would like Mistry replaced by Hussain - it made a nomination. TCS had to then convene a board meeting and table the nomination at the board at a meeting or through a circular resolution. Nothing of this nature was done.  In pre-mediated haste, by a letter of the same date, TCS has directly gone on to announce that Mistry stands replaced," said a source close to Mistry.  

He further added: "The hasty actions appear to have been done at night. The stock exchange announcement at 8 am.  Cloak and dagger machinations with little regard to due process of law has come to define the angry strategy of the Ratan Tata camp.  On October 24, Mistry was replaced by Ratan Tata (at a board meeting without notice of the replacement).  Till date no reasons have been forthcoming - just vague statements about "culture" and "trust deficit"."

Section 169 of chapter 7 of Companies Act, 2013 allows shareholders to remove director in general meeting through ordinary resolution. "Generally it is the Board who elects the chairman and they are the one who should take decision of the removal. However if there is a provision in the article which gives shareholder the power to take such action then they can do so. One needs to look into the provisions provided to comment on the same," said R S Loona, corporate lawyer.

Mistry in a sudden move was ousted from his role of chairman of Tata Sons on October 24. 

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