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Immortalised in dark sun-beaten bronze, his shoulders garlanded with fresh orange flowers, Jamsetji Tata gazes out over the eastern Indian city that bears his name. Before his death in 1904, the founder of the Tata group drew up a vision of the model town that his company would one day build around its first steel plant. 

He planned to offer his workers a healthy environment at odds with the disease-ridden slums he had seen on his travels in 19th-century Europe. “Be sure to lay wide streets planted with shady trees,” he wrote in 1902 to his son Dorab. “Reserve large areas for football, hockey and parks.”

Today, the tree-lined avenues of Jamshedpur, linking Tata-funded amenities from sports academies to a 900-bed hospital, bear witness to a heritage of ethical practice that is one of the group’s most treasured assets. Utilities are handled by a Tata Steel subsidiary, whose chief executive claims to provide the only safe drinking tap water to be found in any Indian city.

A short drive away, company archivist Swarup Sengupta presides over the letters, contracts and directives that Tata, now India’s largest conglomerate, presents as evidence of its stringent moral standards. 

Jubilee Park in Jamshedpur, the model town Tata built around its first steel plant © Alamy

Here are records of the financial crisis that hit Tata Steel in 1924, when Dorab Tata posted his entire net wealth as collateral for a loan rather than lay off a single worker. Here, too, is proof of the group’s pioneering role in introducing modern benefits — from free medical aid to maternity pay — decades before they were required by law. “Mother Teresa and Tata had a very strong relationship down the years,” says Sengupta.

This is the Tata long familiar to Indians and business watchers around the world: a group that tied itself to the principles of public service and humane treatment of workers and communities, a century before “corporate social responsibility” became a buzzword. 

Since Jamsetji set up his small trading company in 1868, it has expanded into a major name in global business, with annual turnover exceeding $100bn. Even amid this huge growth, it retained a name for stable leadership: in the first 144 years after it was founded in Mumbai, the group had only five leaders, all drawn from Jamsetji’s family.

But this carefully guarded reputation for ethics and stability, a source of pride for Tata’s 660,000 employees and India itself, is now threatened by an unprecedented crisis. The upheaval began in October last year when Cyrus Mistry, the first chairman drawn from outside the founding family, was suddenly dismissed without explanation, exposing seething tensions between him and his predecessor Ratan Tata

Mr Tata, now 79, who had run the group for 21 years before handing over to Mr Mistry, returned to the helm until a permanent successor could be found, promising to restore stability. But Mr Mistry, from a family of Mumbai tycoons that still owns 18 per cent of the holding company Tata Sons, has refused to go quietly.

ft.com/magazine

Since his dismissal, Mr Mistry has unleashed a stream of allegations, aimed at destroying Mr Tata’s cherished reputation for integrity and straightforward dealing, in what he says is a campaign to protect the group’s long-term future by ending supposedly deep-rooted governance flaws

Tata Sons has dismissed Mr Mistry’s claims — which range from violation of inside information rules to favourable deals given to Mr Tata’s friends — as driven by a personal vendetta, and accused him of poor performance and an attempt to amass excessive power.

Senior figures in Mumbai’s corporate world have warned privately of the risk that the fallout poses to the reputation of Indian business as a whole. Tata is by far the country’s biggest business group, with products from jewellery to heavy weapons, steel to table salt. It is one of the few Indian conglomerates to have built a truly global brand, with prestigious foreign assets including the UK luxury carmaker Jaguar Land Rover, and it deploys thousands of IT engineers to leading western companies. 

Crucially, even though its official history omits widely known blemishes such as the founding family’s involvement in the opium trade, Tata has been seen as a beacon of ethical conduct and good governance in India, a company free from the skulduggery for which many of its peers became notorious.

A portrait of company founder Jamsetji Tata c1890 © Getty

Extensive interviews with highly placed insiders at the group and access to internal correspondence have laid bare a feud that has left the Indian business world questioning whether Tata’s unique reputation can ever recover from the extraordinary public infighting that has dogged it over the past few months. 

If Mr Mistry’s legal campaign against the Tata Sons board results in failure, “the reputational damage will be repaired, to some extent”, says JN Gupta, managing director of SES, an Indian investment research firm. “But it still won’t be the same as it was. The bubble in the glass will still remain.”

***

As Mr Tata prepared to step down from two decades of chairmanship, in 2011, photographs began to appear of the compact, whitewashed villa in south Mumbai where he would spend his retirement. While highly luxurious by most standards, the new home drew approving comparisons with an ostentatious 27-storey residence a few miles to the north, built at an estimated cost of $1bn by Mukesh Ambani, the country’s richest man. 

Once more, the press reflected on the down-to-earth character of Mr Tata, a man who had ordered that stray dogs be permitted to rest in the lobby of the group’s headquarters.

Mr Tata’s personal brand of humility was honed over a career spent at his family group, even as he made no secret of flashier pleasures, such as a bright red Ferrari California. 

Returning to India in 1962 after seven years of architectural studies in New York, the slender 25-year-old was given an unceremonious induction as an apprentice in the fierce heat of Tata Steel’s cavernous blast furnace at Jamshedpur. In leadership positions over the years that followed, he struggled to turn around Tata’s ailing electronics and textiles businesses, so it was a surprise when he was chosen to succeed his uncle JRD Tata as chairman in 1991.

Ratan Tata, left, in Kolkata in 2000 © Reuters

“All these old satraps said, ‘But who’s Ratan?’” recalls one long-time company insider, referring to a group of senior Tata executives. Mr Tata, who declined to be interviewed for this article, spent much of his early years in charge battling with this old guard, and struggling to convince the wider public of his credentials. “The backlash that I got, both in the media and the stock market, and from our own employees internally, was scary for a new chairman,” he once told the FT of his decision to sell Tata’s soap business in 1993.

By 2000, Mr Tata was confident enough to focus on a campaign of overseas expansion that would snowball in scale. From the Pierre Hotel in New York to British tea brand Tetley and the Anglo-Dutch steel giant Corus, Tata went on an acquisition spree that established the group as a prominent international brand. Ratan Tata’s name grew with it: he was rewarded for his UK investments with an honorary knighthood in 2009. At home, his tall frame now slightly stooped, he became revered as a visionary elder statesman of Indian business.

For one longstanding acquaintance, the adulation of Mr Tata gave cause for concern as the chairman approached the group’s mandatory retirement age of 75. “In this last phase, an ordinary man became an icon. His health was beginning to get stressed, and I don’t doubt that he genuinely wanted to find a successor. It was not a charade. But the trouble was, he was convinced that he was irreplaceable.”

Mr Tata’s authorisation in 2010 of a committee to find his replacement triggered an avalanche of speculation. Like his uncle, Mr Tata had no offspring but some thought that he could keep the leadership in the family by turning to his half-brother Noel. Others suggested global business titans from the Indian diaspora, such as PepsiCo chief executive Indra Nooyi. But the committee surprised outsiders by choosing one of its own members: Cyrus Mistry, an understated Tata Sons director. 

Though he became the first chairman from outside the family, the bespectacled 45-year-old represented the closest possible alternative. Like the Tatas, his family traces its presence in India to an ancient exodus of Zoroastrian refugees from Persia. His ancestor Pallonji Mistry took advantage of the opportunities for ambitious young Parsis in the mid-19th century, establishing Shapoorji Pallonji, a construction company that grew into one of the country’s largest. 

Tata’s ousted chairman Cyrus Mistry in Mumbai this month © Nishant Shukla

The Mistrys were granted a seat on Tata Sons’ board in 1980, having taken a large minority stake in 1965. The two families became still closer with the marriage of Mr Mistry’s sister, Aloo, to Noel, Ratan Tata’s half-brother.

Mr Mistry, softly spoken and stocky, first encountered Mr Tata at his family dining table, listening silently as the older man talked business with his father. Mr Mistry, a keen reader of popular mechanics magazines in childhood, finished his schooling at Dulwich College in London and studied engineering at Imperial College London before returning to help manage the SP group in 1991. 

Since then, he has lived in his family’s Mumbai home, a tall mansion, liberally scattered with 20th-century Indian artworks and with two Jaguars in a basement garage, built on a steep slope overlooking the Arabian Sea. Known for his long working hours, Mr Mistry has maintained a low-profile life away from work, passing time with his wife and two sons. 

“He’s very smart, very detail-oriented,” says one former colleague. “But he’s also a simple guy. Every time he goes to the US, he gets a McDonald’s burger with fries and a large Coke.”

Like his father before him, Mr Mistry joined the board of Tata Sons, in 2006 aged 40, and over the next five years was viewed as quiet but diligent by fellow directors, who backed his appointment as chairman despite his lack of executive experience at a major global company. “

My judgment was that we found the best successor,” says one senior group insider. “He had everything that you needed: he had pedigree, he was a humble man, he was cultured, he was inquisitive, and he worked his butt off — which, at the age of 45, you are supposed to.”

Mr Mistry has since claimed that he refused to be considered for the job when first approached by Mr Tata, content with the challenges on offer at his own family group, and relented only after the selection committee was “unable to locate a suitable candidate”. But there were no public signs of misgivings while he learnt the ropes as Mr Tata’s deputy during the latter’s final year in charge — an extended handover that by all accounts passed off with goodwill on both sides. 

In December 2012, the departing leader retreated to a lakeside property 120km from Mumbai to celebrate his 75th birthday, leaving his successor to settle in to the chairman’s office at Tata’s imposing, stone-clad Bombay House headquarters. In some of his last public remarks as chairman, Mr Tata recounted how he had told the younger man to “be your own person . . . decide what you want to . . . I don’t think it’s right to have a ghost to shadow over somebody.”

Yet within months, tensions emerged. “They’d had the honeymoon, they’d given each other flowers, they’d come back from the Caribbean — but then [Mr Mistry] had to get to work, and that’s when the rain started,” says one senior group insider.

Before the handover, Mr Tata and Mr Mistry had discussed the need to deal with potential conflicts of interest involving Shapoorji Pallonji — which had performed engineering and construction work for Tata companies for several decades — prompting Mr Mistry to resign from all his family group directorships. 

But in a handwritten letter seen by the FT and dated September 24 2013, just nine months after the handover, Mr Tata accused Mr Mistry of failing to address the problem, and urged him to place a ban on all business between the two groups. “This matter is so fundamental that if it cannot be resolved between us it will necessarily have to become an issue of a more public nature,” Mr Tata cautioned, adding that Mr Mistry’s stance “demolishes in spirit and reality the values and ethical standards set by Jamsetji Tata”.

Mr Mistry eventually accepted his demand — while stressing that he was doing so to avoid a public argument that would be “detrimental to the interests of the entire group”, and accusing his predecessor of betraying their earlier understanding. This early dispute set the tone for what was to be a recurring theme in the two men’s evolving relationship, with Mr Mistry resisting what he viewed as unjustified interference from the older man, who, in turn, saw his successor’s defiance as a mark of disrespect. One senior insider compares their deteriorating relationship to that between a woman and her mother-in-law, “where gestures, attitudes, a wave of the hand — these matter”.

***

Further tension was created by Mr Mistry’s emphasis on the problems caused by struggling investments made during Mr Tata’s era. “We inherited a fantastic group with a significant challenge — one of the biggest challenges in corporate history,” says one person who worked closely with Mr Mistry.

Tata’s steel plant in Jamshedpur © Getty

Chief among these was the struggling UK operation of Tata Steel, acquired through Mr Tata’s blockbuster Corus acquisition. After losses at the unit soared to £1m per day, Mr Mistry oversaw the decision last March to seek an exit from the business. Mr Tata viewed this as reflecting a short-term approach and accused Mr Mistry of using him as a scapegoat, telling him in an email days after the decision: “The past cannot be blamed for ever.”

“He should have realised that by attacking the legacy, he was attacking Ratan,” says a person close to the older man.

Even after stepping down as Tata Sons chairman, Mr Tata retained significant power through his chairmanship of the Tata Trusts, charitable bodies that hold 65 per cent of Tata Sons. He remained in regular contact with his successor, who sought his input on significant decisions through emails, letters and regular meetings at Bombay House. But, in January 2015, this arrangement was suddenly thrown into question by an announcement from the Indian securities regulator that the selective external disclosure of price-sensitive information was to be banned, even if it was not used to trade — unless the sharing was done in furtherance of a “legitimate purpose”. 

The regulatory change “put the fear of god into Cyrus,” says one person with direct knowledge of the internal discussions on this subject. “He said, ‘Shit, I’m not a lawyer. Every time I move my little finger, someone will say I’m passing on information.’”

To Mr Tata, Tata Sons’ position as the controlling shareholder in all listed Tata groups meant that the holding company’s board should be consulted on all key decisions — and that the Tata Trusts, in turn, should be kept in the know, given their status as the majority shareholder. But Mr Mistry worried that this might fall foul of the law, as it would mean giving Tata Sons access to price-sensitive information before other shareholders in the group’s listed companies.

Conflict spilled into the Tata Sons boardroom in July last year, after Tata Power, chaired by Mr Mistry, agreed the $1.4bn acquisition of a renewable energy company without seeking prior approval from the holding company. According to people close to Tata Sons and Mr Tata, this deal was seen as part of a pattern of behaviour in which Mr Mistry appeared to be trying to amass power, while restricting the involvement of the Tata Sons board and the Tata Trusts in key decisions. 

“This is the system that they believed Cyrus was trying to build: I’m the chairman of the [operating companies], and I take the decisions at the level of the board, and Tata Sons is basically an unimportant entity,” says one person close to Mr Tata. “[Mr Mistry] really thought he had the upper hand, that Mr Tata was getting very old.”

Mr Tata did not let the matter rest. Later that month he sent Mr Mistry an email proposing that the Tata Sons board should gather to hear competing legal opinions on the matter “in order to put an end to this issue once and for all”. Mr Mistry forwarded the email to Tata Sons director Ronen Sen, seeking his support in standing up to his predecessor. “It is important that the Tata Sons board does not become defunct,” he wrote. “You all have a role to play in its future.”

“Be fair to the guy,” says one person in whom Mr Mistry confided about the pressure he was coming under. “You make him the chairman, he’s trying to clean up the mess, and you tie his hands. I mean, he was getting kicked in the balls every day.”

Mr Mistry, meanwhile, was working on a new corporate governance framework aimed at putting an end to Mr Tata’s supposed interference. The former chairman and his fellow trustees would be granted an annual meeting with Tata Sons to discuss its five-year strategy and annual business plan but would be expected to exert influence over specific decisions only through their representatives on the board.

Mr Mistry sought to discuss the proposed document with Mr Tata but was unable to secure a meeting, according to a letter he wrote to his predecessor on September 23, to which he attached a draft version of the framework. “[I] would be happy to come and get your feedback,” Mr Mistry concluded, after stating his intention to present the document at Tata Sons’ October board meeting. It would prove to be his last.

***

A few minutes before the meeting’s scheduled start on the afternoon of Monday October 24, Mr Mistry was in his shirtsleeves in his office at Bombay House when he was surprised by the entry of Mr Tata and Nitin Nohria, the dean of Harvard Business School, who had joined the board of Tata Sons in 2013.

Having both sat down on his sofa, the two men told Mr Mistry that the situation was “not working out”, and that it was in the interests of all concerned that he should resign. A shocked Mr Mistry refused, according to his version of events, saying: “You do what you have to do, and I’ll do what I have to do.” A person close to Mr Tata attributes harder language to Mr Mistry: “Look, it’s illegal — I’ll fight.”

Cyrus Mistry and Ratan Tata at a company launch in 2012 © Alamy

Having sent a brief text message to his wife — “I’m getting sacked today” — Mr Mistry donned a jacket, and made the short walk to the boardroom. Mr Tata was not present in the room but Mr Mistry was faced by three directors — all prominent figures in Indian finance and industry — who had been appointed at his predecessor’s behest just two months earlier. 

People close to Mr Mistry accuse Mr Tata of having brought in the new directors to ensure a clear vote for Mr Mistry’s imminent sacking — a claim denied by the company, which points to the three men’s extensive and diverse business experience. 

The soon-to-be former chairman was informed by company secretary Farokh Subedar that another director would need to be appointed to chair the meeting, since there would be a vote on a matter that concerned Mr Mistry. On what would be the first of several occasions, Mr Mistry protested that his sacking would be illegal since it had not been included in the board agenda — a complaint that, Indian corporate lawyers say, is unlikely to hold water.

Of Mr Mistry’s eight fellow directors, only the former World Bank executive Farida Khambata broke ranks and abstained when it came to the vote on his sacking. Over Mr Mistry’s continued objections, the board decided that Mr Tata should return to the company as chairman on an interim basis, pending the search for a new permanent replacement, to be appointed within six months. 

Within an hour, Mr Mistry had departed the building, leaving Tata Sons to announce the decision to “replace him”, without explanation, in a terse press release that sent shockwaves through India’s corporate world. 

In conversations with the FT in the week of the sacking, some senior members of Mumbai’s business community expressed shock and sympathy for Mr Mistry, who they considered to have been treated in an unacceptably brutal fashion. “It’s disgusting what Ratan Tata has done to humiliate a person so badly,” said one.

***

Mistry was to test the limits of that sympathy with an explosive fightback that few could have predicted, suddenly casting doubt over the vaunted image of his former employer. One of his main targets in this campaign was an aviation joint venture that Mr Tata had arranged in one of his final acts as chairman.

Tata lost its first airline to nationalisation in 1953 but aviation had been one of Mr Tata’s passions since early adulthood. One of the few public photographs of his youth shows him at the controls of a light aircraft; aged 73, he donned a jumpsuit to co-pilot a Boeing fighter jet at an air show in Bangalore. 

Yet it was only in the dying weeks of his chairmanship that Mr Tata secured a corporate return to the skies, agreeing terms for a joint venture with Air Asia, led by the Malaysian entrepreneur Tony Fernandes.

Within three years, however, concerns were raised at the joint venture’s board about the terms of its transactions with Fernandes’s company. “I am the only one screaming and shouting about this,” Tata’s general counsel Bharat Vasani wrote to Mr Mistry in June 2015, shortly before resigning from the Air Asia India board due to his unhappiness over the matter. 

These worries were redoubled last year, when a forensic audit by Deloitte identified unexplained payments worth Rs220m ($3.2m) by the company. Air Asia and AAI declined to comment, while Tata Sons said AAI had taken appropriate measures over the report.

The trouble at AAI was just one of many explosive revelations and claims that Mr Mistry made public following his sacking, as part of a campaign to expose what he says is a pattern of flawed management that belies Tata’s fabled record of ethical practice. “This is about governance — it’s not about me, it’s not about position,” he told the FT in December, in the first foreign media interview of his career. “This is a group that has to be institutionalised.”

Tata’s sports complex in Jamshedpur, with a photograph of JRD Tata, who led the group from 1938 to 1991 © Alamy

The former chairman’s bombshells began circulating the day after his dismissal, when an email from Mr Mistry to the Tata Sons board and Tata Trust trustees, detailing a catalogue of alleged governance failures, was leaked to the media. A succession of further public statements continued over the ensuing two months, culminating in December with the submission to India’s Companies Law Tribunal of a 300-page dossier of complaints and evidence, calling for the forced removal of the entire Tata Sons board.

Among many allegations, Mr Mistry has homed in on his predecessor’s friendship with the controversial south Indian businessman Chinnakannan Sivasankaran — a relationship that baffles even loyal allies of Mr Tata. Mr Mistry has claimed that Sivasankaran received undue favours from the Tata group, unveiling documents showing that he was helped by Tata companies to buy shares in Tata’s telecoms company at Rs17 per share, just 12 days before the Singaporean sovereign wealth fund Temasek bought a stake at a 53 per cent higher valuation. 

Tata Sons denies any wrongdoing, stating that its involvement with Sivasankaran’s purchase was aimed only at stopping the shares being acquired by a hostile third party. Lawyers for Sivasankaran declined to comment.

Mr Mistry has been joined in his assault on Mr Tata’s reputation by the firebrand ruling-party lawmaker Subramanian Swamy. The former justice minister has gone to court to force action against Mr Tata for alleged complicity in a notorious $26bn scam a decade ago — in which telecom spectrum was sold to favoured parties at knockdown prices — having uncovered an internal report from investigating authorities that recommended Mr Tata’s prosecution. Tata Sons said the matter was thoroughly investigated by the authorities and no evidence of wrongdoing on its part was found.

But sympathy for Mr Mistry is eroding among many in India’s business community, who fret that his campaign is driven largely by a desire for vengeance and may do permanent damage to a treasured national institution. Among the most controversial statements made by Mr Mistry was his claim, in the leaked email, of huge potential writedowns across the group — an assertion that prompted an immediate plunge in the market capitalisation of Tata’s listed companies, which declined by more than $10bn in the weeks following his sacking.

“What he’s doing, to my mind, is completely unprofessional,” says one senior banker in Mumbai. “It’s all for a personal ego trip. If he was so concerned about these things, what was he doing as the chairman of the company?”

***

On Tuesday, Mr Tata will again officially hand over the chairmanship of Tata Sons — this time to a man whose rural southern Indian origins, far removed from the Parsi homes of south Mumbai, in one sense make him the first real outsider to take charge of the group. The appointment of Natarajan Chandrasekaran, chief executive of Tata Consultancy Services, has been broadly welcomed by the market. 

The self-assured marathon runner, known for his assiduous cultivation of business relationships around the world during three decades at TCS, was seen as the obvious choice to restore confidence. Chandrasekaran’s efforts to focus attention on the future could be overshadowed, however, by Mr Mistry’s continuing legal fight against a group in which most of his family wealth is still invested. He is prepared to take the battle to the supreme court, according to people close to him.

And despite the criticism of Mr Mistry’s tactics, his claims to have been reduced to a “lame duck chairman” have fuelled concerns over the transparency of management at the conglomerate. “Tata Sons currently has no accountability to the market at large,” says Amit Tandon, co-founder of Institutional Investor Advisory Services, a Mumbai research firm.

Still more worrying to many is the revelation of the extent of the power exerted by the Tata Trusts — an issue that has become more pressing given the advanced age of Mr Tata and the fact that no succession plan is yet in place. “It is the main concern of everybody and his frailty requires urgent action,” says one friend. “He is fully aware that he needs to do that, but he’s been through a tough time.”

Tata’s newly appointed chairman Natarajan Chandrasekaran © Getty

Amid calls for the powers of the Tata Trusts to be curbed, there are countervailing warnings that this could open the door to a rival gaining influence over the group, should Mr Mistry’s family finally sell their stake in the holding company. Market rumours are swirling about the possible interest of the Piramal conglomerate, whose chairman was one of the new directors inducted in August. Piramal did not respond to a request for comment.

Even if sweeping reform is undertaken, Tandon warns, Tata “cannot expect to be treated the same way going forward”. A blemish seems likely to cling to its once shining corporate image. Senior Mumbai bankers say that its previous reputation for straightforward dealing had serious long-term value, easing its path to agreements with workers, business partners and governments around the world. 

The efforts to repair this damage will be monitored nervously far beyond Bombay House. Such a conspicuous blow to the reputation of India’s largest and most esteemed group has been a painful blow for the country as a whole, at a time when its government and businesses are striving to attract foreign investment by building a reputation for “ease of doing business” and casting off the murky image that has shrouded parts of its corporate sector.

The chaos at Tata could prove a harbinger of problems elsewhere, cautions Saurabh Mukherjea, head of institutional equities at Ambit Capital. Mr Tata, he notes, is part of a generation of Indians who oversaw the rapid evolution of the country’s top businesses following the groundbreaking reforms of 1991, which ended the stifling controls of the bureaucratic “Licence Raj”. 

Many of these businessmen have recently handed over control of their groups or are preparing to do so — and Mr Tata is not alone in showing a reluctance to cede influence, he says, noting a recent tirade of criticism by the founding chairman of IT company Infosys against its current management. “We are struggling with the first intergenerational shift of power in the post-liberalisation era,” Mukherjea says. “It’s coming down to tussles of ego — the fading away of one generation and the emergence of the next.”

Simon Mundy is the FT’s Mumbai correspondent

Photographs: Nishant Shukla; Getty Images; Dinodia Photos/Alamy; Reuters; Life Picture Collection/Getty Images; Hulton Archive/Getty Images

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