Voice from the Rooftop

Blog of Vincent Augustine D'Souza

Black money and notes

In USA, 8 November 2016 was Election Day. Indian channels were interested in the election and in the evening there were discussions about elections. I put on RT at 8.08 a.m. At 8.40 p.m. I switched to India Today. It was a surprise to see Modi talking. Greater surprise was to hear about demonetisation of 500 and 1,000 rupee notes. Banks and ATMs are closed on 9 November 2016. People can exchange notes from 10 November 2016 to 30 December 2016 in banks and post offices. There will be new 500 and 2,000 rupee notes. The move is to take black money out of circulation.
Modi’s announcement changed the course of discussion on Indian news TV channels. Panelists who were to discuss American election were out of work unless they could speak on black money. TV channels went to politicians, economists and industrialists for their reaction.
Modi’s move is like curate’s egg, good in parts. The decision to do away with 500 rupee notes was a good one. It is cancelled by new 500 rupees notes. The decision to do away with 500 rupee notes was a good one. It is made worse by having 2,000 rupee notes now and 1,000 rupee notes at a later date.
RBI Governor Urjit Patel said “Notably, in recent years, fake Indian currency notes in high denominations – Rs 500 and Rs 1,000 notes – has been increasing. The government has also observed the misuse of genuine high denomination notes in terror financing and also holding black money.”
Counterfeiting is easy with computers, colour copiers, and scanners. It is just a matter of time before black money is held in new 500, 1,000, and 2,000 rupee notes.
BJP’s opponents, some of them Congress members, have said this move will not change much. Most black money is held in participatory notes, real estate, gold and jewellery. Congress did not end participatory notes when it was in power.
Best thing is to stop printing 500, 1,000 and 2,000 rupees notes. When they are soiled exchange them with 100 rupee notes. Corruption is the main reason for black money. Tax evasion is another. Ending corruption will put an end to black money to a great extent and tackling tax evasion will put an end to black money to some extent. Some taxes have to be lowered or abolished.
In January 1978 Janata government had demonetised 1,000 and 10,000 rupee notes. There was a cartoon. A beggar says to a person who has moved away “Take back this 10,000 rupee note and give me 10 paise.”

Cyrus Mistry strikes back

On 24/10/2016 Tata Sons Board removed Cyrus Mistry as Chairman and appointed Ratan Tata as Interim Chairman. On 25/10/2016 some spoke on the side of Ratan Tata. Harish Salve said Cyrus Mistry was incompatible with Tata values. Next day Dushyant Dave said Ratan Tata does not have good reputation due to his association with Niira Radia. Stanley Pignal of The Economist said Tatas are opaque if not secretive.
On 26/10/2016 Cyrus Mistry wrote a letter to Directors of Tata Sons Ltd. According to one source the letter was written on 25/10/2016 and e-mailed at 10.05 p.m. Anyway the letter became public on 26/10/2016. That elicited a response from Abhishek Manu Singhvi. Harish Salve, Abhishek Manu Singhvi, Mohan Parasaran are lawyers hired by Tata. P. Chidambaram and Justice Raveendran are also mentioned.
Tata Sons did not have retirement age for Chairmen. When Ratan Tata was to become Chairman of Tata Sons he wanted to get rid of Chairmen of group companies who were there for many years. J. R. D. Tata, then Chairman of Tata Sons, sided with Ratan Tata. Executive Chairmen were to retire at 65. Non-Executive Chairmen were to retire at 75. Ratan Tata got rid of Chairmen like Rusi Modi who headed TISCO.
When Ratan Tata was nearing 75 his half-brother Noel Tata was expected to succeed him. To the surprise of many Tata Sons appointed a selection committee to find a successor to Ratan Tata. Obviously Ratan Tata did not want Noel Tata to succeed him. Once again to the surprise of many Cyrus Mistry who was a member of the selection committee became Chairman.
There is family connection here. Ratan Tata is the son of Naval Tata and his first wife Sonoo. Noel Tata is the son of Naval Tata and his second wife Simone. Cyrus Mistry is the son of Pallonji Mistry and Patsy Perin Dubash. His sister Aloois married to Noel Tata. Cyrus Mistry is brother-in-law of Noel Tata and half-brother-in-law of Ratan Tata.
Cyrus Mistry in his letter said he was shocked beyond words at the happenings of Board meeting on 24/10/2016. His replacement without explanation and opportunity to defend himself was invalid and illegal and must be unique in the annals of corporate history. In 2011 he had initially refused to be Chairman when Ratan Tata and Sushanta Bhattacharya had approached him. He was asked to reconsider and after consulting his family he accepted. He was assured of a free hand. After his appointment the Articles of Association were changed and inappropriate interpretation followed.
Foreign acquisitions except for JLR and Tetley had left a huge debt overhang. Steel, hotel and chemical businesses outside India made losses. Tata Capital had made losses. The loan to Siva under strong advice of Venkataraman resulted in loss. Telecom business has been continuously haemorrhaging. The original structure of Docomo raises several questions. Tata power’s bid for Mundra project resulted in loss. Tata Motors lost 1,000 crores to keep Nano going. Nano supplies plant supplies gliders to a company where Ratan Tata has a stake. Due to losses the write down could be 118,000 crore rupees. Dividends were reduced. On the positive side Kalinganagar project was completed.
Ratan Tata negotiated Air Asia and Singapore Airlines JV and presented Cyrus Mistry with fait accompli. In case of Air Asia there are fraudulent transactions of 22 crore rupees. Venkataraman is on the board of Air Asia.
Mistry mentioned under him the net worth of Tata Sons increased from 26,000 crore rupees to 42,000 crore rupees.
Mistry mentioned the amendment to Articles of Association created alternative power centres and resulted in dysfunctional governance. Once trust directors Nitin Nohria and Vijay Singh left the Board meeting for almost an hour to get instructions from Ratan Tata.
Mistry cannot believe he was removed for non-performance as Nomination and Remuneration Committee had recently commended his performance.
Cyrus Mistry at the end mentions he was pushed into the position of a lame duck Chairman. He has his pride and dignity intact.
Abhishek Manu Singhvi said Cyrus Mistry should not wash dirty linen in public. Cyrus Mistry was removed on moral, propriety factors. He said Ratan Tata is not a master puppeteer. The removal is not illegal. He asked “Does Mr. Mistry think the entire eminent Board is insane? They all lost confidence in him.”
Cyrus Mistry was the second person without Tata surname to be Chairman of Tata Sons. The first was Nowroji Saklatwala (1932-1938).
How much money did Tata Group borrow from banks? How much debt was converted into strategic debt restructuring? How much debt was converted into corporate debt restructuring? How much debt was repaid? How much debt is default? I understand Tata Steel owes 88,000 crore rupees to banks. We need to know everything about Tata Group loans.

Return of Ratan Tata

On 24/10/2016 Tata Sons Board removed Cyrus Mistry as Chairman and replaced him with Ratan Tata as Interim Chairman. This was a surprise.
Ratan Tata is 78. He had retired in 2012. Cyrus Mistry is 48. He was 44 when he became Chairman. Mistry’s election in 2011 was a surprise. He was in the committee to select a successor to Ratan Tata. The committee elected him. Now Tata Sons has formed a selection committee to find a permanent Chairman. The committee comprises Ratan Tata, Venu Srinivasan, Amit Chandra, Ronen Sen and Sushanta Kumar Bhattacharyya.
There have been various reactions to Mistry’s removal. What happened to Cyrus is a Mistry. Surgical strike at Tata Sons. Tata group Shows Cyrus Mistry the door. Cyrus Mistry removed as Tata Sons chief, Ratan Tata is interim chairman. Cyrus Mistry sacked in Tata Sons churn. Tata Sons is the new Samajwadi Party. Tata Sons unexpectedly removes Cyrus Mistry as Chairman. Tata Sons in turmoil after Chairman’s bizarre ousting.
Tata Trusts own majority of shares of Tata Sons. Around 66%. Mistry family owns around 20% of shares of Tata Sons. Ratan Tata controls Tata Trusts. The Tata camp is said to have obtained legal opinion of former Solicitor General Mohan Parasaran about removing Mistry. Mistry is said to have been told about Tata Trusts being unhappy about him and he insisted on Board vote. Mistry may move court against his removal.
Tata companies have faced challenges and many have suffered losses. There is arbitration with NTT Docomo. Ratan Tata is said to have been unhappy with the decisions Mistry took regarding Indian Hotels, Corus, and Tata Chemicals.
It will be interesting to see who will be Chairman of Tata Sons. How long Ratan Tata will be Interim Chairman? It may be more than four months.

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