Tata-Mistry battle: Sebi finds no violations, in favour of stricter norms

New Delhi: Market regulator Sebi feels that the board of a company can continue to seek expertise of a 'Chairman Emeritus' even after the person has left the company. However, the regulator appears to be in favour of stricter norms for removal of independent directors. This comes as an important development during the ongoing Tata-Mistry battle.

Ever since the boardroom battle erupted at the conglomerate after removal of Cyrus Mistry as chairman in October last year and subsequent allegations by him, including about 'interference' by Ratan Tata, Sebi has been keeping a close watch on the developments related to the group.

The markets regulator has carried out a detailed scrutiny of any possible breach of securities laws, including about corporate governance and insider trading norms, a senior official said.

However, no serious breach of the existing provisions has been found so far and any violation that may come to light would be dealt with accordingly, the official added.

At the same time, the regulator is of the view that the Tata-Mistry episode has shown that further tightening of rules may be required for removal of an independent director.

This stance, which will be shared with the Corporate Affairs Ministry, has emerged since the norms for re-appointment of independent directors are much stricter already.

Sources said that Sebi apprised its board in the last meeting about the developments regarding Tata-Mistry case, including the allegations of irregularities in removal of independent directors and on sharing of sensitive information with Chairman Emeritus.

It was felt that when a person is appointed Chairman Emeritus, the company's board can discuss with the person various issues relating to corporate performance, mergers and acquisitions, divestments and other important details to benefit from the person's experience.

According to Sebi, communication of unpublished price sensitive information can be done for "legitimate purposes, performance of duties or discharge of legal obligations".

Under Sebi (Prohibition of Insider Trading) Regulations, communication of unpublished price sensitive information (UPSI) is permitted if it is in furtherance of legitimate purposes, performance of duties or discharge of legal obligations.