Cyrus proposed legal action against Siva
Mumbai: Six weeks before Cyrus Mistry was removed as Tata Sons chairman on October 24, he had convinced the board to take legal action against C Sivasankaran‘s Siva Group for refusing to pay its Rs 694-crore part of the Rs 8,450-crore claim on Tata Teleservices (TTSL) made by Japanese telecom major NTT DoCoMo.
Serial entrepreneur Sivasankaran had bought nearly 9% stake in the unlisted TTSL in 2005-06 and had a legal obligation to contribute Rs 694 crore towards the Japanese telecom major’s claim. Mistry had asked for Tata Sons’ approval for legal action at its board meeting held on September 15.
However, even before Tata Sons could initiate any legal proceedings or communicate the board’s decision to Sivasankaran, the latter sent a legal notice, also dated September 15, to Tata Sons and DoCoMo alleging mismanagement of TTSL and asserting the right to seek damages.
The September 15 date of Tata Sons’ board decision as well as Siva Group’s legal notice prompted Mistry to write a mail to the company’s senior management, asking “how this came just after our decision at the Tata Sons board to go legal? We need to check this out”. Tata Sons received the legal notice on September 19.
The relationship between Sivasankaran and the Tata Group dates back more than a decade. Papers available with TOI establish that in 2005-06, Sivasankaran invested Rs 884 crore to buy the nearly 9% stake in TTSL. Of this, Rs 650 crore was financed by Standard Chartered Bank for which the same TTSL shares were kept as collateral. This loan was guaranteed by Tata Sons. Another Rs 132 crore was a loan from Kalimati Investments, a subsidiary of Tata Steel. A Tata Sons spokesperson confirmed the financing structure. So, Sivasankaran had to bring in only Rs 102 crore to buy the stake in TTSL. A detailed mail sent to Sivasankaran remained unanswered.
The stocks to Siva Group were allotted at Rs 17 per share in 2005-06. After eight days, Temasek also bought into TTSL, but at Rs 26 per share. In effect, TTSL’s valuation jumped more than 50% in just eight days after Sivasankaran bought his stake.
In a mail to Mistry, Ratan Tata on October 8, 2013 said that Sivasankaran was offered TTSL shares not “because TTSL was in dire need of funds” but because “he believed that the telecom sector was fast growing and that he could sell his stake at a sizeable profit”.
Source : Times of India