Pallonji Mistry’s Roller Coaster Ride With The Tatas

Excerpted from ‘The Tatas, Freddie Mercury & Other Bawas: An Intimate History of the Parsis’, by Coomi Kapoor, with permission from the author.

The histories of the Tata, Wadia and Mistry families are integral parts of the saga of the Bombay Parsis. Each one of these venerable Parsi clans left a distinct impress on the city— the Tatas and Wadias as industrial pioneers, and the Mistrys as builders of major city landmarks. And because Bombay Parsis are a tiny, endogamous community, their dizzying familial ties tend to be too complicated and confusing for outsiders to fully grasp. In the last generation, old-timers recall that JRD and Naval Tata, Ratan’s father, barely spoke to each other though they were on the same boards for half a century. Naval and Pallonji Mistry were good friends, banding together to prevent JRD from making Nusli Wadia a member of the Tata Sons board. Nonetheless, Ratan and Nusli developed a close friendship when they entered their respective family businesses. While in recent years, Nusli has abandoned his old friend Ratan to frequently defend Cyrus, the son of the man who prevented Nusli from being appointed to the Tata Sons board.

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In the early 1970s, when India was still a closed economy, Pallonji looked overseas to expand. In 1971, he won the contract to build the ceremonial palace in Muscat for the sultan of Oman and produced a flamboyant example of contemporary Islamic design. As a result of the stunning palace and the impressive Al Khor mosque in Qatar, the firm gained recognition in the Middle East. Large projects followed in Abu Dhabi, Qatar and Dubai.

At a young age, he advised Shapoorji to go beyond construction, as he, Pallonji was not quite comfortable in the rough-and-tumble of building sites. It was at his suggestion that the family business diversified and invested in companies. For instance, through one of his tenants, the respected businessman Jamshed Gazdar, Shapoorji was introduced to Neville Wadia, who was looking for capital to branch out into other businesses. Shapoorji bought a 40% share in Nowrosjee Wadia and Sons, the managing agents for Bombay Dyeing. At a young age, Pallonji became a director in the company. In the 1960s, Shapoorji acquired the Brady Group, an old English managing agency, which ran several businesses including the Belapur sugar mills, the Caxton printing press and Brady flats. The family eventually divested their stakes in both Nowrosejee Wadia and Brady as well as firms such as Special Steels and United Motors. Apart from F.E. Dinshaw’s share in the Tata managing agency’s commission, Shapoorji also acquired his Associated Cement Companies (ACC) shares. Dinshaw had merged his cement company with ten other companies to form the ACC, of which Pallonji was chairperson for many years. When the Tatas offloaded Forbes & Company, the Mistrys bought it. Besides company shares, the family’s portfolio includes a sizeable real-estate holding.

But, the most prized asset in the Mistry share portfolio was its 18.37% stake in Tata Sons. For years, the Tatas were not transparent about the circumstances in which the shares were purchased. Trusted insiders suggested that the share transfers were made by Dinshaw back in the 1930s. While the Mistrys refuted the claim, it was repeated regularly in the pink papers as gospel truth. The Mistrys’ explanation that the shares had in fact been purchased much later from Tata family members was ignored. An affidavit submitted by the Tata Trusts before the NCLT now confirms the Mistrys’ version. The shares were bought on three separate occasions. JRD’s widowed sister Rodabeh Sawhny sold her stake of 5.9% shares in January 1965 with her brother’s blessings as she was in need of funds. In July 1969, the Sir Ratan Tata Trust, of which Naval Tata was then chairperson, raised funds by selling a 4.81% stake in Tata Sons to Pallonji’s investment company, Shapoorji Pallonji Investment Advisors Pvt. Ltd. Why the Ratan Tata Trust sold some of its shares in 1969 has not been explained. One theory is that Shapoorji had accumulated a large number of IOUs from Tata companies. Whether the outstanding debts were connected with construction works or to settle long-pending unpaid commissions owed to F.E. Dinshaw Limited is a matter of conjecture.

However, as noted earlier, the last Mistry purchase in 1974 was without JRD’s consent, and the Tata chief had a shouting match with his younger brother, Dara, who never had much of a head for business. He was said to have been envious of his elder brother and sold his 6.68% stake in the family business in a fit of pique. The reason this sale created such a scare in the group was the introduction of the MRTP Act in 1969 and JRD complained privately that the Mistrys took advantage of people who were weak and credulous.

It was only as late as 1980 that JRD grudgingly agreed to make Pallonji a director on the Tata Sons board. (Shapoorji had passed away by then.)

As a director, Pallonji made it clear he would abide by the decisions of the Tata management, offering little resistance to JRD. ‘Pallonji never interfered, never challenged, never sought any power,’ a Tata insider recalls. The Phantom of Bombay House was rewarded for his unstinting support, winning all the major Tata construction contracts, such as the Tata Thermal Power Station at Trombay. He also was offered first right on any company the Tatas were keen to sell, such as Forbes & Company.

By the late 1960s, it was generally acknowledged in the community that Shapoorji was among the richest of them all. But few in the rest of India were aware of the extent of his wealth. Most assumed that the richest Parsis were the Tatas and the Godrejs. It was only much later, when TCS went public, that financial journalists calculated the value of the Tata Sons shares and discovered that Shapoorji, because of his Tata holdings, was among the wealthiest Indians.

When Ratan took over in 1991, he and Pallonji were united in a common goal to strengthen Tata Sons’ control over the group’s individual companies and unseat the satraps who were entrenched in various parts of the Tata empire. Within days of assuming office, Ratan penned a handwritten note to Pallonji stating that ‘Our common agreement and mutual faith will foster a true and lasting relationship. Our standing together will be a matter of strength.’ For the Mistrys, the most ironic line of this letter of support is ‘Let me reiterate that I will never do anything to hurt you or your family.’

Coomi Kapoor is Contributing Editor at the Indian Express, the author of ‘The Tatas, Freddie Mercury & Other Bawas: An Intimate History of the Parsis’, and ‘The Emergency: A Personal History’.

The views expressed here are those of the author, and do not necessarily represent the views of BQ Prime or its editorial team.