The board of directors of Tata Sons on Monday removed Cyrus P Mistry as chairman, four years after he took the reins of India's largest conglomerate.
The board named former group chief Ratan Tata as interim chairman and set up a panel to choose a new chairman, reports Associated Press.
Tata Sons owns the Jaguar and Land Rover brands, as well as Tetley Tea. It is one of India's oldest industrial houses and comprises over 100 companies, including Tata Steel, Tata Motors, Tata Power and the IT giant, Tata Consultancy Services.
The company did not give any reasons for Mistry's surprise removal.
‘The committee has been mandated to complete the selection process in four months,’ the company said in a statement.
Mistry, 48, is the youngest son of Pallonji Mistry, whose family is the largest individual shareholder in Tata Sons with an 18 percent stake. He previously was managing director of the Shapoorji Pallonji Group, which has interests in construction, real estate, infrastructure and textiles.
Growth in Tata Sons, India's largest business group, has slowed in recent years, with turnover falling to $103 billion last fiscal year from $108 billion the previous year.
Meanwhile, Indian television channel NDTV reported Cyrus Mistry found his removal an illegal action.
The company removed Mistry, almost four years after he became its first chief from outside the Tata family, and brought back Ratan Tata, 78, who has taken interim charge until a successor is appointed.
Details provided to NDTV by at least two insiders privy to the events (one of them was present at the meeting) suggest that the countdown to Mistry's removal led to acrimonious, unprecedented scenes inside the boardroom.
Mistry's exit was not - perhaps deliberately - listed on the board agenda. An insider told NDTV that it was brought up as a 'residuary' item, under the 'any other items' category, listed at the end of every board agenda.
When it came up, Mistry is said to have protested, calling it an illegal move.
He is said to have pointed out that according to the Tata rule book, a 15-day notice has to be given before bringing such an item before the board, a timeframe, he said, in which he could have made a case for himself.
But the board is said to have told him ‘we have legal opinion’ in support of the decision. Mistry asked to see the opinion; the board reportedly told him ‘this was not a court hearing’.
At this point, Mistry said he would challenge the decision.
Of the nine-member board, six voted in favour of his removal, two abstained. Mistry, as the ninth member, refused to be part of the process.
He however remains a member of the Tata board, as well as a director of the company.
Another board insider told NDTV that the decision to remove Mistry has been weeks, perhaps months, in the making. The decision, he said, ‘was not based on pique’, but entirely on Mistry's dismal performance as CEO.
Only two of Tata's multiple companies are profitable, he said, almost all the others are struggling.
Want stories like this in your inbox?
Sign up to exclusive daily email
More Stories from Trade & Commerce