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Ratan Tata replaces Kerkar as chairman of Taj hotels group

The board of directors of the Indian Hotels Company Limited on Tuesday unanimously resolved to appoint Ratan N Tata as the chairman of the board of directors of the company.

R K Krishna Kumar and S Ramakrishnan were unanimously appointed the managing director and deputy managing director of the company respectively for a period of five years with effect from Wednesday.

The Indian Hotels Company runs the Taj Hotels, India's largest chain of five-star hotels.

Ajit Kerkar, whose term of appointment as chairman and managing director came to an end on August 31, attended the meeting.

When Kerkar proposed Ratan Tata's name as chairman of the board of directors, N A Palkhivala, director of the company, pointed out that Kerkar's presence at the meeting was without prejudice to the view held by the board under legal advice that he (Kerkar) had ceased to be a director from last Monday, September 1.

Kerkar, however, said that he adhered to the view given to him by his legal advisors and continued to be a director.

Without going further into the controversy, the board appointed Tata as the chairman and recorded its appreciation of the services rendered by Kerkar to the company.

Earlier in the day, sources at Bombay House, headquarters of various Tata companies, clarified that RatanTtata, head of the Tata group of companies, was neither involved nor had any knowledge of the developments about the potential Foreign Exchange Regulation Act violation on the leave-and-licence agreement between Indian Hotels Company and Singapore Airlines for the latter's office accommodation at the Taj Mahal Hotel in south Bombay, the flagship of the company.

A press communique issued by the Tata Services Limited said that the only communication that Tata had had with Ajit Kerkar, then the Indian Hotels Company chairman, was long before the signing of the leave-and-licence agreement when, on June 13, 1993, Tata wrote a letter to Kerkar indicating that he was requested by Singapore Airlines for a 10 per cent reduction in the deposit which the Taj Hotel had asked from the airline.

Later, the deposit, amounting to US dollar 4.9167 million paid by SIA, was parked by the hotel management with Taj International Hotels in Hong Kong instead of Taj Mahal Hotel in Bombay for more than three and a half years, without the knowledge and approval of the board of directors and the statutory authorities.

It was only in May this year that the statutory auditors and the non-executive directors first got an inkling of this deposit transaction from SIA to Taj International at Hong Kong and at the very first board meeting, thereafter on June 23, Ratan Tata queried whether placing the deposit with Taj in Hong Kong instead of bringing it to India, constituted a FERA violation. He had regretted his inability to adopt the accounts until this issue was satisfactorily clarified, the communique added.

He had suggested that the deposit amount be repatriated immediately and the entire matter be brought to the attention of the Reserve Bank of India with the view of obtaining post facto approval, if possible.

However, the management of the Indian Hotels Company did not listen to the suggestions made by Tata and in the company's next board meeting on June 30, the management came up with a different proposal without repatriating the security deposits from Hong Kong.

Ratan Tata and the other Tata Sons directors dissented and did not agree to adopt and sign the accounts, and insisted that the matter be referred to the Reserve Bank and the security deposit be repatriated immediately.

As a result of this demand, the Taj management finally applied to the Reserve Bank on July 8, 1997, and ultimately repatriated the entire amount on August 6 with interest as directed by the Reserve Bank through a letter on the same day.

In this context, the press communique clarified that the Tata Sons directors exercised their fiduciary responsibility in ensuring that the security deposit was repatriated to India and taken into the books of the Indian Hotels Company.

EARLIER REPORT:
Anger and acrimony at the Taj Hotels: the bitter departure of Ajit Kerkar