Cyrus Mistry may drag Tata Trusts to court, challenge its power to influence business decisions

The bitter feud between Cyrus Mistry and Tata group has been in the headlines for quite sometime. Mistry may now challenge the power of Tata Trusts to influence business decisions at Tata Group.

The trust, which is controlled by Ratan Tata, owns nearly two-third of Tata Sons and the rest is owned by Mistry family's Shapoorji Pallonji group. This has led to concerns about the governance structure of the trusts.

"A charitable trust is allowed to hold investments but cannot directly be involved in business plans. It is about institutionalising a role and ensuring proper governance. The chairman of Tata Sons and Tata Trusts should be different, so that nobody has unbridled power," an executive close to Mistry told ET.

The trust, however, said that it doesn’t interfere with day to day activities of Tata Sons but need certain information to make sure that the investments are safe.

"We don't interfere with the day-to-day governance of Tata Sons. There is certain information we require from Tata Sons to make sure our investments are safe as it the primary source of our philanthropic operations," said VR Mehta, a trustee on the Sir Dorabji Tata Trust.

A few months before Mistry's ouster, directors on the nomination and remuneration committee (NRC) of Tata Sons - Ronen Sen, Vijay Singh and Farida Khambhata - said at a board meeting that it may be desirable to seek legal opinion on the interplay of relevant entities such as Tata Sons, Tata Trusts and group companies.

Mehta also said when Mistry over as the chairman of Tata Sons, a pact was signed between the holding company and the Tata Trusts clarifying the relationship between the two.

However, people close to Mistry have denied the existence of any such agreement.

Public trusts are usually barred from holding shares of commercial business by the Maharashtra Public Trusts Act's 1973 amendment. They are allowed to invest in banks and postal savings accounts and can otherwise lose tax exemptions.
(image: IndiaTimes)