NEW DELHI: After the rebuff by independent directors of Indian Hotels Company, Tata Sons will have to tread cautiously if they seek Cyrus Mistry's ouster from group's companies, as experts in the industry feel that "it will not be an easy task" legally.
A section of experts with whom IANS spoke to, including lawyers dealing with corporate matters, state nothing can be said definitely as they are not privy to the memorandum and the articles of association of the group's several companies.
Yet, they add, going by the statute, a lot would depend on how Mistry decides to play the ball. Nesar Ahmed, former president of Institute of Companies Secretary of India, said: "If he decides to dig his heels in, then removing him as director would not be an easy job."
Ahmed, also a corporate consultant, adds that the way Tatas have conducted themselves in removing Mistry may not strictly breach the law, but certainly was not in conformity with the the transparent-and-ethos based corporate governance that they have been espousing all along.
However, there is also a view that a lot would depend on which side the government would lean, as financial institutions like the Life Insurance Corporation (LIC) and state-run banks have sizable stakes in Tata Group's various entities.
Towards this, they also point towards the meetings that Ratan Tata, now back as the interim chairman, had with Prime Minister Narendra Modi and Finance Minister Arun Jaitley soon after the removal of Mistry by the Tata Sons Board.
While there is a general agreement that it would not be a cakewalk for Tata to remove Mistry from the board of the group 's companies, legal luminary Lalit Bhasin says it depends on the facts of each case.
This view is also shared by Harish Vaid, vice-president for Corporate Affairs at Jaypee Group.
While Amitabh Chaturvedi, a lawyer dealing with corporate matters, said that the Memorandum of Association is the basic document laying down the procedures, another corporate lawyer -- while endorsing the position says -- it all depends on the pleasure of the board.
Also, the former vice-president of the Institute of Companies Secretary of India, Vaid says, on the basis of the information available, it is not clear whether the chairmen of Tata group's companies are the nominees of Tata Sons or if they are appointed by the respective boards.
If it is to be decided by the individual boards, Vaid says that the independent directors would have a decisive say as in the case of Indian Hotels Company, where the move to remove Mistry as the chairman was frustrated by seven independent directors.
In that situation, Vaid says they will have to wait for the next shareholders' meeting when the directors are appointed. It is at such a meeting that the Tatas can exercise their indirect control and remove Mistry.
In this situation, the Shapoorji Pallonji group, having a little more than 18 per cent stake in Tata Sons, will not have any bearing, as the Tata Trusts have the majority stakes in Tata Sons.
Ahmed says other options for Tata Sons would be to requisition an extraordinary general meeting of shareholders by taking recourse to Sections 115 of the Companies Act.
Under this section, notice for such a meeting can be given by stakeholders having 1 per cent of the total voting power, or those having shares of Rs. 5 lakh. The sacking can be asked for under Section 169 of the Companies Act, which provides removal of directors.
He says that not only the chairman who is being sought to be replaced has to be given a reasonable notice period, but even the market regulators and the exchanges where the shares are listed have to be informed about it. The rules of the corporate governance have to be observed.