Four minority shareholders of Tata Group firms on Wednesday moved the Bombay High Court challenging the proposed removal of industrialist Nusli Wadia as an independent director, while Tata Sons, the Group’s holding company, requested the court to make it a party. With this suit, for the first time the government has been dragged into the legal wrangling set off by the sacking of Cyrus Mistry as Tata Group chairman, as the Ministry of Corporate Affairs and Law Ministry have been made defendants.
The suit came up before Justice S J Kathawala, who asked the plaintiffs to give a copy of the plaint to the Union government and adjourned the matter to December 16 when the court would also hear Tata Sons’ plea to let it become a party. Janak Mathuradas, Yogesh Mathuradas, Chanda Mathuradas and Pramila Mathuradas, minority shareholders of Tata Chemicals, Tata Motors and Tata Steel, wanted the HC to restrain promoters of these firms from voting at Extraordinary General Meetings (EGMs), scheduled for December 21 to 23, on a resolution to remove Wadia.
They also challenged a rule in the Companies Act which allows promoters to vote on a resolution seeking removal of independent directors. Only public shareholder should be allowed to vote on a resolution on removal of independent directors as these directors discharge a fiduciary duty towards minority shareholders and protect their interests, they said. Independent directors cannot be equated with non-independent directors and cannot be removed under section 169 of the Companies Act, 2013, the suit said. The three Tata companies, on a direction of Tata Sons, have called EGMs to remove Wadia from their boards under section 169 of the Act.
Last week, another group of minority shareholders of Tata companies had moved the High Court claiming damages from Tata Sons’ interim chairman Ratan Tata and others for losses suffered by investors after shares of group companies fell following Mistry’s sacking.
Meanwhile, Wadia on Wednesday said that he had differences with Ratan Tata over continuation of Nano which has proved to be a serious drain on the financial resources of the company. In a letter to the shareholders of the homegrown auto major ahead of the EGM on December 22, Wadia said the investment and losses on Nano have been in thousands of crore of rupees.
Giving reasons why he believed the small car should be closed, Wadia said, “The Nano, initially a car conceived to sell at Rs 1 lakh was launched in 2008 and has proved to be a serious drain on the financial resources of Tata Motors. Even at price Rs 2.25 lakh, the car neither sells nor is viable as every sale of the vehicle is at a substantial loss to the company.”
He further said: “After its commercial failure, which became evident not too long after its launch, I differed strongly with its continued operations and funding. Huge losses have been incurred over the years. The plan on which the investment was made was for 2.5 lakh cars while the production in 2015-16 was in the region of 20,000 cars and presently far less.”
Cautioning against continuation of the car, he said: “The delay in closure if Nano is a serious drain on the finances of the company, in addition it has created very negative image on the passenger vehicles business of the company. “The investment and losses on Nano have been in thousands of crore of rupees. Concerns have been raised not only by me but by several others regarding the continuing operations.”
Wadia also said the “alleged reasons for seeking my removal do not even remotely relate to my performance or my conduct as an Independent Director of Tata Motors for 18 years.” He also denied allegations that his “actions may put Tata Motors and its future in grave jeopardy and impact the overall morale of the workers, employees and management who have joined a Tata company”, saying it was “false and untrue and is conjecture”.
Claiming that no worker, employee or manager or director of Tata Motors has ever complained of his conduct, Wadia said, “On the contrary, it is they who have sought my advice on several occasions outside the board meeting on many issues.” Wadia further said he has already sent notices for defamation to Tata Sons for “carrying on a personal vendetta against me for not toeing their line”.
“I believe that it is Tata Sons and its interim Chairman who have vindictively issued this notice with malicious intent to remove me from the Board of Tata Motors. I believe that it is their actions, which lack bona fide and in fact are malafide,” Wadia wrote in his letter to the shareholders seeking their support.
Wadia said the passenger vehicles business (PVB) of Tata Motors over the years, from 2009-10 onwards, “for variety of reasons, be it design, product quality, execution, high cost, has had a serious negative financial impact on the company”. “The current capital employed in the PVB division is substantial, on which there is a serious level of loss impacting the overall financials of the company. These results have been linked to the manner in which the affairs of the company, with regard to its strategy was being formulated and centralised in the past,” he said.