Mumbai: The board of Tata Sons Ltd on Monday replaced Cyrus P. Mistry as chairman, less than four years after he took the helm, and named his predecessor Ratan Tata interim chairman for four months.

The board of the group holding company did not specify a reason for the abrupt move, which was announced after markets closed.

“Tata Sons in its collective wisdom and on the recommendations of the principal shareholders decided that it may be appropriate to consider a change for the long-term interest of Tata Sons and Tata group," a spokesperson said.

A selection committee comprising Ratan Tata, Venu Srinivasan, Amit Chandra, Ronen Sen and Kumar Bhattacharyya was given the mandate of finding a replacement for Mistry, 48, who became chairman of the $103 billion conglomerate in December 2012, at the end of Tata’s over two-decade tenure at the top. The board was given four months to complete the task. “In the interim, the board has requested me to perform the role of chairman and I have agreed to do so in the interest of and reassurance to the Tata group," Ratan Tata, 78, said in a statement addressed to “colleagues".

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The development, which portends at least short-term turmoil, comes at a time when the conglomerate, whose business interests range from tea to telecom and salt to software services, has been trying to recast or dispose of the key UK steel business, which it acquired in a $12.9 billion purchase of Corus Group Plc. in 2007 under Ratan Tata.

“This is quite an unusual situation, unexpected from a group like Tata which stands for its values. This means there could possibly have been some governance issue or some major disagreement with either the style of functioning or decision that Mistry may have taken," said Kavil Ramachandran, professor and executive director at the Thomas Schmidheiny Centre for Family Enterprise at the Indian School of Business.

According to a person aware of the development, the Shapoorji Pallonji Group, of which Mistry is a scion and which is estimated to hold an 18% stake in Tata Sons, is protesting the move, paving the ground for what could be a messy battle. About two-thirds of Tata Sons is held by philanthropic trusts such as the Sir Dorabji Tata Trust and the Sir Ratan Tata Trust.

Mistry will continue as a Tata Sons director, the spokesperson cited earlier said.

However, the group executive council (GEC), a brainchild of Mistry’s, has been disbanded, said a person aware of the development. The GEC page has been pulled down from Tata Sons’ website as has Mistry’s September interview to the in-house magazine in which he stated his views on some of the underperforming companies in the group. “Our individual companies need to earn the right to grow," he said in the interview.

The boardroom putsch has been some time in the making, according to a person close to Mistry, who asked not to be identified. Differences have surfaced over how Mistry has been dealing with the significant challenges facing the group.

Several of Mistry’s operational decisions were challenged by Ratan Tata, according to this person. Still, it is the prerogative of the largest shareholder to do this, the person said a few weeks ago. Mint couldn’t ascertain if there was an immediate trigger for this ouster.

“Primarily, it was a lack of communication between the shareholder and the management. A lot of decision-making was done unilaterally by Tata Sons and was not approved by Tata Trusts," said another person briefed about the matter.

Among the six chairmen Tata Sons has had so far in its history, Mistry’s is the shortest tenure at just short of four years.

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Since taking over, Mistry has repeatedly talked about continuing to seize business opportunities, especially in emerging technologies. Under his watch, the group embarked on a $28 billion capital investment programme, which included diversification into newer areas such as defence.

His tenure coincided with headwinds to growth, global political and economic uncertainty and volatility in commodity demand and prices, which meant he was fighting too many fires at the operating company level.

At Tata Consultancy Services Ltd, the group’s cash cow, growth is petering out, which means less money returned to the parent. Tata Global Beverages is talking about revaluating stressed assets in Russia and Eastern Europe. Tata Teleservices Ltd is in a messy divorce with NTT DoCoMo Inc. Tata Steel is struggling in Europe. Tata Power Co. Ltd has been embroiled in a case over tariffs in an aggressive power project bid.

Shrija Agrawal, Shailaja Sharma and Sapna Agarwal contributed to this story.

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