The Tata-Mistry Saga: A Critical Analysis of Cultural Differences

Problem Statement

The case examines the cultural issues arising out of the conflict between two business

conglomerates namely Tata Sons and Shapoorji Pallonji Group. It is an attempt to undertake

an objective analysis into events that led to the ouster of Cyrus Pallonji Mistry and how they

could have been dealt better.

About the Case

The long battle between Tata Sons and Cyrus Mistry finally concluded with Tata Sons

winning the legal case in the Supreme Court. The Hon’ble Court allowed all the Civil Appeals

of Tata Sons, and the counter appeals filed by the Mistry group were dismissed.

Chronology of major events has been highlighted below:

2006 - Mistry joined the Board of Tata Sons, a year after his father retired from the Board.

2013 - Mistry was appointed as Chairman of Tata Sons. In addition, he was also Chairman of

all major Tata companies including Tata Industries, Tata Steel, Tata Motors, Tata

Consultancy Services, Tata Power, Tata Teleservices, India Hotels, Tata Global Beverages and

Tata Chemicals.

2016 - Two Cyrus Mistry family backed investment firms moved NCLT alleging oppression of

minority shareholders and mismanagement by Tata Sons. They also challenged Cyrus

Mistry’s removal.

2017 – NCLT Mumbai set aside plea of the two investment firms over maintainability issue,

citing that they didn’t meet the criteria of 10% ownership in a company.
2018 – NCLT Mumbai dismisses plea of Mistry challenging his removal as Tata Sons

Chairman. NCLAT admits petition filed by Mistry in his personal capacity and decided to her

the case along with the main petitions filed by two investment firms.

2019 – NCLAT restores Mistry as Executive Chairman of Tata Sons but suspended its

implementation for four weeks to provide time for Tatas to appeal.

2020 – Tata Sons challenges NCLAT decision before the Supreme Court.

2021 – Supreme Court delivers its verdict, allows Tata Group’s appeals, and sets aside

NCLAT order restoring Cyrus Mistry as Executive Chairman of the Group.

History between Tata Group and Mistry Family

The relationship between the Tata group and Mistry clan dates back all the way to 1965. The

history as to how Mistry acquired ownership interest in Tata group has been provided

below:

1965: Mistry family acquired a 6% stake from a private individual

1969: Another 5% block from Tata Trusts, the majority shareholder

1974: Another 6.5% block took Mistry’s stake to 17.5%

1995: Mistry subscribed to a 1995 rights issue and the stake rose to 18.4%

About Tata Sons

The growth of Tata has been intertwined with the growth of India. The Group is known for

taking bold decisions that are required to take the country forward. For Instance, the Group

forayed into steel development when India was largely an agrarian economy, it ventured

into the airline business when it was uncommon for Asian countries to have private airlines
and through its IT services arm (TCS) the group led a major IT transformation wherein India

today is recognized as a software superpower across the World.

About Cyrus Pallonji Mistry

Cyrus Pallonji Mistry is an Irish businessman of Indian origin. He was the sixth chairman of

the group, and only the second to not bear the surname Tata. He has been the Managing

Director of Shapoorji Pallonji & Company, which is part of the Shapoorji Pallonji Group. In a

2013 article, The Economist categorized him as "the most important industrialist in both

India and Britain”.

Flashpoints between Cyrus Mistry and Tata Sons

Some of the major flashpoints between Cyrus Mistry and Tata Sons have been listed below:

1. Electoral funding for Odisha’s assembly elections

Cyrus Mistry, the chairperson of Tata Sons in 2014 proposed an amount of 10 Crore towards

electoral funding for Odisha’s assembly elections. His stated reason behind doing this is that

Tata Steel has large Iron ore deposits in that state. But the board members nominated by

Ratan Tata were against this decision. Their version was that Tata has only been contributing

towards parliamentary pools and that too only through trusts. Funding of state elections was

against the culture and ethos of the Group. This led to an ethical conflict between both the

parties as this proposal was finally laid off.

2. Separate Bidding for Army Contracts

The Tata group under Mistry proposed two separate bids totaling to INR 60 Crore towards

the army contract of Infantry Combat Vehicles. One of it was from the Tata Power Strategic

Equipment Division and the other bid was from the Tata Motors. On this, Ratan Tata had

contradicting views. He believed that a unified bid would help in keeping intact with the
company’s image and would have promoted synergy between different groups within it.

Whereas Mistry believed that biding through two separate groups would increase the chances

of win- win situation.

3. Tying up with Little Caesars

Mistry presented a proposal of tying up with a US pizza chain called Little Caesars in the

Tata Sons board meeting. This action was against conventions, as proposals of such tie ups

were dealt with at an individual entity level. Ratan Tata emphasized that the proposal was

against conventions. On contrary, Mistry backed up his action by citing Tata Sons’ earlier tie

up with Starbucks.

4. Not following through on deal with Docomo

The Tata group had earlier made a deal with the Japanese company ‘Docomo’, but later when

Mistry took over, he did not abide with those citing that the deal was an illegal act according

to Indian law. Other stakeholders at Tata Sons believed that not following through on

commitment was against the ethos of the Group and will bring disrepute to the name of Tatas

in the long run. Ratan Tata also accused Mistry of being non-co-operative on the issue.

Finally, Mistry was forced to deposit INR 8,000 crore with the Delhi High Court but this was

considered to be a breach of trust which was totally against the principles of Tata Group.

Supreme Court Verdict

The judgement was in favor of Tata group, the bench dismissed all the charges of

oppression and mismanagement against the Tata sons limited made by entities owned by

Cyrus Mistry. The court held that mere removal of a person as a chairman of a company is

not a subject matter under section 241 unless it is shown to be oppressive or prejudicial.

Section 241 & 242 of the companies Act 2013 do not specifically confer the power of

reinstatement.
Observable Aspects of Organizational Culture

Responsibility of a manager is to keep an eye on the company's culture; understand the

culture's core values, assumptions, and beliefs, as well as their visible manifestations;

examine the corporate culture in the organization using rites and ceremonies, stories and

myths, symbols and structures, control systems, and power relationships.

Rites and Ceremonies – Managers hold rights over the cultural values to demonstrate the

company's ideals in a spectacular way. But in instances as that of conflicting values between

individuals holding parallelly crucial roles, this demonstration can put the organization in a

pitfall. Mistry was accused by the Tata group of "frequent departures from the group's

culture and ethos," without specifying what those transgressions were. Also, Tata is alleged

to disapprove of Mistry's treatment of factory workers, saying that Mistry "must go to

factories and face workers, try to address their difficulties, and not deal with it from

Mumbai," as this is not the "Tata method."

Stories and Myths – Cyrus Mistry was the Tata group's second non-Tata chairman. Tata Sons

had claimed at the time of his dismissal that during Tata Power's acquisition of Welspun's

renewable projects in June 2016, the company's former chairman Cyrus Mistry had failed to

keep the board informed about his decisions. Mistry, on the other hand, denied these

claims. According to later reports based on emails, Tata Trusts trustees were involved in

debating the structure of Tata Power's acquisition of Welspun Renewables.

Symbols – TATA is popularly known for identifying itself with India’s rich culture and

heritage which is reflected in its decision for not shutting down its loss-making Nano plant
due to emotional reasons. Meanwhile, Mistry has repeatedly questioned the Tata Nano

plant's continued presence in Gujarat which led to alleged differences between Ratan Tata

and Cyrus Mistry over the latter's decisions pertaining to the ill-fated Nano deal.

Organizational Structure/Culture – ‘Culture eats strategy for lunch’ - managers can invest all

their time and resources they have in defining a killer strategy but implementing it will be

impossible if the cultural values are out of line. This statement is commonly found in all

organizational management books, but a failure to comprehend it led to a downfall of a

great business personality as we have seen in the case of Cyrus Mistry. According to Ratan

N. Tata, Cyrus Pallonji Mistry's removal from his position as executive chairman of Tata Sons

Ltd. in October was the culmination of a series of difficulties that included "conflicts of

interest," "bad governance," and a "tendency to concentrate control" of Tata group

companies.

Power Relationships – People holding core positions in an organization have the

responsibility to uphold their support staff and ensure that the transition is smooth for them

to get familiar with the changes and implement in their routine. In this case, the analysis

was that Cyrus Mistry wanted to make radical changes without paying heed to how people

would perceive it. He wanted to build a brand image for himself irrespective of the

consequences. This led to a huge argument between the board members and was

eventually taken up with the shareholders and this ignited the series of controversies.

Control Systems – This element refers to the internal workings of the ways in which an

organization operates, how information is managed, and decisions are made. The two

organizations, Tata Consultancy Services Ltd. and Cyrus Investment Pvt. Ltd. had stark
differences in whether managers applied behavior or outcome control related to employee

activities. There was a serious ill-fit in the two cultures and underlying values.

Conclusion
The saga between Tata Sons Limited and Cyrus Mistry is a classic case where the Chairman’s

ethos and values were not aligned with those of the Tata Group.

Exhibits
Governing Laws

 Section 241 of the companies Act 2013 – this section provides relief tot the members of
the company in case of oppression
 Section 242 of the companies Act 2013 – powers of the tribunal
 Section 244 of the companies Act 2013 – this section provides the eligibility criteria to
file an application under section 241 of the companies Act 2013