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Mistry claims Tata ouster 'illegal' and 'invalid' in confidential email

MUMBAI -- In what can been seen as a precursor to a bitter legal battle, Tata Group's freshly ousted chairman Cyrus Mistry has allegedly written a scathing message to the board of holding company Tata Sons describing his sacking as illegal and invalid and highlighting several issues concerning the running of group firms.

In a lengthy email to the board, he wrote of constant interference from former head and now interim chair Ratan Tata, which reduced him to being a "lame duck" chairman and alleged corporate governance issues in the group.

Mistry, Tata Sons' chairman for nearly four years until his abrupt sacking, is supposed to have sent the email in the evening of Oct. 25. A copy of which was passed to the Nikkei Asian Review, however, it could not be independently verified. Representatives of both Tata Sons and Cyrus Mistry refused to comment on the matter.

"I was shocked beyond words," read the message. "I am writing this letter to the board to emphasize the total lack of corporate governance and to point out the failure of the directors to discharge their fiduciary duty to stakeholders of Tata Sons and of the group companies."

The message alleges the sacking was made without explanation and represented a unique case in the "annals of corporate history."

The email also detailed legacy issues Mistry faced while inheriting the group chairmanship from Ratan Tata. Particular reference is made to debt laden companies such as Tata Steel's European venture, Tata Motors' passenger car business, Indian Hotels, Tata Power's power project in Mundra, and Tata Teleservices.

The problems at these companies are described as "legacy hotspots," which faced a write-down of 1.18 trillion rupees ($17.16 billion) if realistically assessed at a fair value.

The message mentions that Tata Motor's Nano, launched as the world's cheapest car, is a project that lost around 10 billion rupees at its peak.

"As there is no line of sight to profitability for the Nano, any turnaround strategy for the company requires to shut it down," Mistry said. "Emotional reasons alone have kept us away from this crucial decision."

The letter questioned the terms of agreement between Tata and Japan's NTT Docomo over their telecom venture and said Tata Sons could have lost $5 billion by exiting the telecom venture. That would be in addition to the $1.17 billion payout being sought by Docomo over claims of breach of contract.

The message claims the group's foray into aviation was Ratan Tata's wish. The claim is that Mistry was faced with a "fait accompli" joint venture with Singapore Airlines just months after being required to do the same with Malaysia's Air Asia and the infusing capital was considerably higher than what had been initially committed.

The email raised some "ethical concerns" over certain transactions and a "recent forensic investigation revealed fraudulent transactions of 220 million rupees involving non-existent parties in India and Singapore."

Many of the allegations, legal experts say, form the basis for legal action against Tata Sons, but whether or not Mistry is willing to enter a long-drawn out legal battle, and undergo the speculation and scrutiny involved, remains to be seen.

"He has so far been perceived as shy and reticent, but this letter could be quite damaging for the Tata Group's reputation," said an expert who did not wished to be named.

Ratan Tata, meanwhile, has begun the business of stabilizing company. In a meeting with company heads, he asked them not to panic and charted out a course of action for group firms.

The Tatas have also filed caveats in various courts and company law tribunals in the country to ensure being heard first if Mistry or the Shapoorji Pallonji Group, run by Mistry's family and the single largest shareholder in Tata Sons, were to bring the matter to court.

Although Tata Sons has not given any reasons for the ouster of its chairman, it is believed that the board was unhappy with Mistry's performance.

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