Mistry skipped the TCS board meet today; he had on Nov 10 been replaced as chairman by Ishaat Hussain but continues to be director and holds 4.1 million shares.Tata Consultancy Services (TCS), the largest information technology (IT) service provider in the country, decided in its board meeting on Thursday, to call an extraordinary board meeting (EGM) on December 13 to oust its former chairman, Cyrus Mistry, as director.
In a statement, the company said: “It has been decided to convene an extraordinary general meeting (EGM) pursuant to the special notice and requisition dated November 9 sent by Tata Sons Limited… and if thought fit, to pass a resolution for removal of Mr C P Mistry as director.”On November 10, Mistry was ousted as the chairman by Tata Sons, which holds a majority stake in the company. On Thursday, for the first time, the board of TCS and Tata Sons met to decide the date for an extraordinary general meeting (EGM) to seek his removal as director. Mistry chose to give the meeting a miss.He holds about 4.1 million shares of the company in a personal capacity.
Mistry and Tata Sons Interim Chairman Ratan Tata are embroiled in a boardroom battle since October 24, when the former was ousted unceremoniously as Tata Sons chairman.The move to remove Mistry from TCS also came as a surprise, as the company received a letter from Tata Sons on November 9, nominating Ishaat Hussain as the interim chairman.
Tata Sons could take this drastic measure in case of TCS as it holds 73.33%. It also used the Article 90 of the Articles of Association (“AOA”) of the company to remove Mistry.In a statement, TCS had said: “Article 90 empowers Tata Sons Limited to nominate the chairman of the board of directors, so long as Tata Sons, along with its associates, holds at least 26% of the paid-up equity share capital of the company. In exercise of the powers under Article 90, Tata Sons Limited… has nominated Ishaat Hussain as the chairman… The provisions of the AOA are binding.”
Among the several disagreements between Tata and Mistry, sources have claimed, that selling TCS’ five% stake was also a bone of contention.TCS has been a cash cow for the group’s bold and sometimes loss-making foreign acquisitions. Despite huge dividend outflows to the group, TCS sits on $4.8-billion cash and short-term investments, which many have been wondering why the company is not using to acquire assets globally that can bring new capabilities to the company.
So far, the management, N Chandrasekaran, chief executive officer and managing director, has stated while TCS open for mergers and acquisitions, it can also very well build new businesses.