Sebi wants Tata cos’ audit panels to probe for breach

Move follows concerns raised by former chairman of Tata Sons, Cyrus Mistry

CORPORATE GOVERNANCE NORMS

THE SECURITIES and Exchange Board of India (Sebi) has asked stock exchanges to write to Tata Group firms and direct them to address the concerns raised by Cyrus Mistry, former chairman of Tata Sons, before the audit committees of listed firms for evaluation, said sources familiar with the development.

According to sources, the market regulator is looking into the Tata-mistry boardroom feud for any possible breach of corporate governance norms and listing regulations at various listed companies of the over $103-billion conglomerate. “We want the audit committees of the listed firms of the group to check if there were any violations of rules or regulations,” said a person with access to details of the communication while declining to be named.

The regulator’s move comes after Mistry sent an email to the board of Tata Sons and Tata Trusts, leveling a series of allegations against the Tata group and his predecessor, Ratan Tata ranging from fraudulent transactions, unethical practices and conflict of interest, raising questions about the level of corporate governance in the conglomerate.

“As of today the claims and counter claims made by both the parties involved are just allegations. The Sebi move to refer the matter to the audit committees of listed firms is the first step in establishing the truth,” said JN Gupta, managing director of proxy advisory firm Stakeholders Empowerment Services.

Gupta said the findings of the audit committee will form the basis of further action by the markets regulator. “Once the audit committee submits its report on the allegation made by both the parties, Sebi can decide the next course of action if any,” he said.

The spokesperson of Tata Group did not offer any comments for the story. “The issue is between Sebi and the stock exchanges. I have nothing to say on this,” he said.

Mistry, had in his email referred to the “total lack of corporate governance” while raising questions about key investment decisions in several group companies taken during his predecessor’s tenure besides warning of a potential $18-billion write down on what he termed as “legacy hotspots”.

“As you are aware from presentations to you in the recent past, if we look at the aggregate data between 2011 and 2015 and limit the analysis largely to the legacy hotspots (Indian Hotels, Tata Motors PV, Tata Steel Europe, Tata Power Mundra and Tata Teleservices), it will show that the capital employed in those companies has risen from Rs 1,32,000 crore to Rs 1,96,000 crore,” he had said after being sacked as Tata Sons chairman on October 24.

Following Mistry’s explosive email, the stock exchanges had sought clarification from Tata Power, Tata Motors, Tata Communications, Indian Hotels, Tata Teleservices and Tata Steel on his allegation that the group could face $18 billion in write downs.

Tata Sons has started the process for removing Mistry from Tata Group firms one after another. Mistry has already been ousted as chairman of Tata Consultancy Services (TCS) and Tata Global Beverages Ltd. Extraordinary general meetings (EGMS) have been called to remove Mistry as director on these firms as well as Tata Motors and Indian Hotels Co Ltd. Tata Chemicals, where Tata Sons holds 19.35 per cent stake. While TCS EGM has been called on December 13, that of Tata Steel has been slated for December 21. Shareholders of Tata Motors will meet on December 22, and Tata Chemicals EGM will be on December 23. The EGM of Tata Power Co Ltd will be on December 26.

The regulator’s move comes after Mistry sent an email to the board of Tata Sons and Tata Trusts, leveling a series of allegations against the Tata group and his predecessor, Ratan Tata ranging from fraudulent transactions to conflict of interest