How Cyrus Mistry turned from Ratan Tata's protege to his archrival in corporate battle

Known for his inimitable quiet leadership style, Ratan Tata made some of the boldest decisions that redefined the way the Tata Group and Indian industry operated on a global scale, though he also found himself at the centre of intense battles for control of the conglomerate not once but twice in his career.

He faced the first challenge, when he took over as chairman in 1991, against long-time executives who had been running “fiefdoms” under his predecessor. However, within six years of taking over, Tata reorganised the then $5.9 billion revenue group, including sacking leaders such as Russi Modi of Tata Steel, Darbari Seth at Tata Chemicals and Ajit Kelkar of Indian Hotels Co.

His second battle came in 2016, four years after his retirement. This time it was about preserving his legacy as Cyrus Mistry, former Chair of Tata Sons, sought to reduce debt. Tata had helmed the group for 21 years and named Mistry to be his successor in 2012, only to be sacked on October 24, 2016 in a public and acrimonious ouster.

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The battle led to a public spat with the Shapoorji Pallonji family, which owns 18 per cent of Tata Sons and has had a 80-year partnership with the Tatas. In 2020, Mistry’s family signalled its intent to sell an 18% stake in Tata Sons.

Tata then returned as interim chairman of the conglomerate before handing over the baton to Natarajan Chandrasekaran in January 2017 and moving to his role of chairman emeritus of Tata Sons. N Chandrasekaran remains at the helm of Tata Sons, to date.

The successor

Cyrus Mistry’s name as the replacement for the outgoing chairman of the Tata group of companies, Ratan Tata, came as a surprise for many.

In the November 2011 announcement naming Mistry as his successor Tata said, “He has been on the board of Tata Sons since August 2006 and I have been impressed with the quality and calibre of his participation, his astute observations and his humility.”

According to reports, Mistry was reluctant to take up the job but accepted the offer after some persuasion, including by Tata himself. At the time, Tata’s advice to Mistry was, “Be your own man.”

Cyrus was the sixth chairman of the Tata group and the second chairman who did not have the Tata surname. Cyrus joined the Tata Sons board as a director in 2006 and since then was representing the Mistry family on the board.

He was made chairman on the basis of his representation from Shapoorji Palonji, the largest shareholder in Tata Sons.

Corporate battle

However, strains became apparent in the ties between Tata and Mistry within a few years. In an equally surprising move in October 2016, Mistry was sacked as chairman of Tata Sons, and Tata became the interim chairman of the salt-to-software conglomerate.

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This eventually resulted in India’s biggest corporate battle with Mistry moving the court against his removal. He did manage to win at the NCLAT which restored him as executive chairman of Tata Sons but the legal battle ended in 2021 with the Supreme Court ruling in favour of the Tata group.

Though there was no clarity about the actual reason behind his sudden ouster, media reports suggested that it had been brewing for some time as Tata Sons were unhappy with his approach of selling non-profit businesses and “concentrating only on cash cows”.

In a statement, the board said it was decided “it may be appropriate to consider a change for the long-term interest of Tata Sons and Tata group”.

While the board gave no detailed reason for the change, media reports hinted that there has been discontent with some of Mistry's actions, including asset sales.

The board had nine members, including Tata and Mistry. Six of them are said to have voted for removing Mistry and two abstained.

The trigger

Some attributed the cracks in Tata-Mistry ties to the lacklustre performance of some Tata Group companies, while others to Mistry's handling of crucial issues like the dispute with NTT DoCoMo and Tata Steel's sick assets in Europe.

Several of Mistry’s decisions, including the disposal of some of Indian Hotels Co’s overseas properties and especially the move to shut the UK steel operations, did not go down well with Tata Trusts. Many were considered Ratan Tata’s legacy that helped the group revenues top $100 billion.

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Mistry fought the legal battle as the one for his reputation, as he believed he was doing what he thought was best for the company. He first approached the National Company Law Tribunal, which dismissed his petition challenging the manner in which he was ousted and ruled that the board and majority shareholders had lost confidence in him.

He, however, successfully appealed in the National Company Appellate Tribunal, but the Supreme Court sided with the Tatas. Though shocked by the verdict, Mistry said, “We will take the knocks on our chins. My conscience is clear. My aim at Tata was to ensure a robust brand driven system of decision making and governance that is larger than any single individual.”

After his exit from Tata Sons, Cyrus did not take back management control at Shapoorji Pallonji and Co. He instead carved out something for himself. Cyrus floated a venture capital fund, Mistry Ventures, to back startups.

Cordial ties

Interestingly, before the acrimonious ouster of Mistry as the Tata Group chairman, the two families shared cordial ties for years.

Ratan Tata had complete support of Pallonji Mistry, a key director and one of the largest shareholders of the company, when he was appointed as the successor of JRD Tata at Tata Sons in 1991. The Mistry clan’s ties with the Tatas dated back to 1936, when they first bought a stake in Tata Sons, marking the beginning of what would become an 80-year-old alliance between the two families.

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Pallonji and Tata had an amiable relationship, with the former supporting the latter's vision. Pallonji, the patriarch of the Shapoorji Pallonji Group, never interfered with Tata's decisions or lobbied for power for himself.

Pallonji held a pivotal position in Tata Sons, bolstered by his family's nearly 18% stake in the holding company - more than Tata Trusts itself.

Their business ties deepened into personal bonds when Pallonji's daughter married Tata's half-brother Noel. Pallonji remained on Tata Sons' board for a quarter of a century before retiring in 2005, with his son Cyrus Mistry succeeding him.