Mistry’s conduct during Welspun deal betrayed his duties: Tata Sons
2 min read . Updated: 31 Jul 2020, 11:05 PM ISTThe acquisition of Welspun required Tata Power to raise debt, which had to be cleared by Tata Sons’ shareholders
Tata Sons on Thursday alleged that its former chairman Cyrus Mistry undermined the Tata Sons board during the acquisition of Welspun’s renewable projects by Tata Power. As per the court documents filed by the company, the matter had significant bearing on Tata Sons, as Mistry did not keep the board informed of his decisions.
In June 2016, Tata Power had agreed to acquire Welspun Renewables Energy, which owned 1.1 gigawatts of renewable energy, for an enterprise value of ₹9,249 crore.
The charges were levelled in filings before the Supreme Court, which is hearing a petition by Tata Sons and Tata Trusts against a National Company Law Appellate Tribunal (NCLAT) order of December 2019. In its ruling on Mistry’s dismissal as chairman, the NCLAT had said Tata Sons’ actions were oppressive against minority shareholders, particularly to the Shapoorji Pallonji group, which holds more than 18% in Tata Sons.
Mistry had moved a petition in December 2016 after he was sacked as the chairman in October 2016. “The manner in which Cyrus Mistry went about the acquisition of Welspun during his tenure as executive chairman is a clear proof of undermining the board of Tata Sons," the company said in the rejoinder filed on Thursday.
The company added that before the acquisition, Tata Power did not offer any background or clarification to the directors of Tata Sons that it was in advanced stages of finalizing the Welspun deal and that a definitive agreement was to be signed. The acquisition required Tata Power to raise debt, which had to be approved by Tata Sons’ shareholders.
“Even before the board of Tata Sons could deliberate on the issue, a public announcement of the acquisition was made, which publicly reflected that the said transaction had implicit approval from Tata Sons," it said.
This rendered any decision-making by the Tata Sons board futile, and led to the acquisition becoming a topic of alarm in board meetings held in June 2016.
Terming this conduct a “betrayal of his duties as chairman", Tata Sons said this led to a loss of trust in his ability to lead Tata Sons. “It was expected that in a matter having a significant bearing on Tata Sons as also Tata Power, he would keep the board of Tata Sons fully apprised of such material facts," said Tata Sons.
While the Mistry group did not offer a comment, a group official disputed the claims. “Tata Sons was kept abreast of the plan through a Tata Sons board meeting in March 2016 and further in May 2016 through a presentation, which was not opposed by any nominee directors," the official said.
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