Lessons from Tata-Mistry saga

BOTH SIDES MUST SHOW HOW CORPORATE CONFLICT CAN PRODUCE A STABLE RESOLUTION, NOT LEGAL WARFARE

- SHYAMAL MAJUMDAR

THE ROOTS OF the alliance between the Tatas and the Mistry family run deep. In the 1930s, the Mistry patriarch, through acquisition of FE Dinshaw & Co, secured a 12.5 % stake in Tata Sons-a connection that would deepen over generations.

Over time, particularly during a Tata rights issue in the 1990s, the Shapoorji Pallonji (SP) Group's stake grewto 18.4%, making it the largest individual shareholding outside the Tata Trusts.

For decades, Tata Sons rested on a delicate power-sharing equilibrium: majority control by the Tata Trusts and the single most influential minority bloc held by the SP Group. When the Tatas required patient equity and non-interfering minority capital, they had it. When the Mistrys wished to participate in India's largest business, they had rightful access.

Two towering personalities stewarded this arrangement. Pallonji Mistry-often called the "Phantom of Bombay House" for the unobtrusive yet undeniable sway he exerted-sat on the Tata Sons board for about a quarter century, retiring in 2005. The alliance was deepened by family ties: Pallonji's daughter Aloo married Noel Tata, Ratan Tata's half-brother. In the early 1990s, when JRD Tata passed over the baton, Pallonji's support helped smooth Ratan's succession, setting the stage for a transformative era of global acquisitions and institutional modernisation at the group.

One clear evidence of the mutual trust between the two patriarchs was the following: In years past, Tata Trusts lacked direct voting rights due to its charitable status; this constrained its power relative to private shareholders. Pallonji's role, owing to his voting rights, was thus important. But around 2000, legal and regulatory changes were made to restore full voting rights to Tata Trusts. These changes, which helped strengthen the Trusts'control over Tata Sons, had the tacit support of the Mistry side.