If Monday was bad for the Tata Group, Tuesday was worse. The abrupt ouster of Tata group chairman Cyrus Mistry in a boardroom tussle could now end up in a courtroom, though both sides have claimed they won't draw swords for now.
If you are trying to catch up on India's biggest corporate battle, here's what you need to know.
1) Tatas play safe with legal cover
Fearing a legal challenge from Mistry, Ratan Tata's legal eagles filed "caveats" in all courts, including with the National Company Law Tribunal.
A caveat is filed in courts as a preventive measure to ensure that courts do not issue any ex-parte orders, and should not hear any matter without allowing the other side to appear.
"There is a risk of a closed-door appeal," said a Delhi High Court lawyer. Mistry could have asked courts to stay further appointment of directors or changes in management, which now the court cannot approve without listening to Tata's arguments.
Cyrus Mistry's office played down reports of filing counter caveates, saying concerns of litigations were misplaced at this state. The Shapoorji Pallonji group said this morning that there is no basis "at this stage" for reports that Mistry was contemplating taking Tata Sons to court.
"Neither the SP Group nor Mr Cyrus Mistry has made any statement yet. While the circumstances are being studied, there is no basis to media speculation about litigation at this stage. As and when a public statement becomes necessary, it would be made," said a spokesperson of the Shapoorji Pallonji Group, which is owned by Mistry's family.
3) It's business as usual for Ratan Tata
The interim boss asked Tata companies to act as leaders in their respective markets and enhance returns to shareholders. “The companies must focus on their market position vis-à-vis competition, and not compare themselves to their own past. The drive must be on leadership rather than to follow,” he said in his first address to his company officials after the ouster.
“I look forward to working with you as we have worked together in the past. An institution must exceed the people who lead it. I am proud of all of you, and let us continue to build the group together,” he said. He asked the leadership of the companies to focus on their respective businesses, without being concerned about change in leadership.
4) Tata counter, however, took a hit at Dalal Street
Tata group stocks took a beating on Tuesday. Shares of Tata Metaliks plunged 8.72 per cent to hit a low of Rs 385 on BSE. Tata Steel tanked 4 per cent to hit a low of Rs 409. The Tata Motors stock fell over 2 per cent before recovering fully. Tata Communications slipped 3.93 per cent to Rs 642. The group has over two dozen listed companies.
“This is a very large fight, which is going to get uglier by the day because here aapne malik ko galla se hata diya hai. Mistry and his family owns 17-18 per cent directly in Tata Sons and the trust. Trustees are trustees, they cannot be running the businesses,” said Anil Singhvi, Ican Investment Advisors.
5) Will Wednesday see the beginning of a bitter court battle?
Mistry, say people with direct knowledge of the matter, would be filing interim injunction in Bombay High Court. "The fight would be over the articles of association of Tata Sons. While Mistry’s side would argue that the removal was unjustified, other side is set to challenge it," a person with direct knowledge of the matter said.
Mistry has roped in two senior lawyers from law firm Shardul Amarchand Mangaldas for the same.
On Tuesday morning, senior litigation lawers including Harish Salve, Abhishek Manu Singhvi and Kapil Sibal, who were representing Tata Group, met lawyers representing Mistry. "The battery of lawyers met at Taj Colaba but the discussions did not go as intended," another person in the thick of things told ET.
Image Source Indiatimes.com