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An era ends, not with canapes and champagne, but with anger and acrimony

Ajit Kerkar will step down soon at the helm of the Indian Hotels group, which runs among other things Bombay's famed Taj Mahal hotel. But the transition has not been smooth, with the group's promoters, the Tatas, keen to replace Kerkar -- not one of Tata Sons chairman Ratan Tata's favourite managers -- with one of its nominees. Its motive is clear: it would like Indian Hotels to make a clean break from the Kerkar era. The corporate battle threatens to get uglier by the minute. What are the issues at stake?

Ajit Kerkar has a migraine.

A person of less mental fortitude would probably have had a coronary.

The man who, at age 28, found a badly managed, shoddily run hotel thrust on him courtesy J R D Tata; the man who in his own quiet and unassuming fashion not only turned it round and made it the happy hunting ground of the elite in Bombay but went on to build a chain of classy hotels across the country; the man who is widely credited with having built up Goa as the playground of the international tourist is, today, the man who finds himself at the centre of a headline-making corporate battle.

What is even more ironic, perhaps, is that his troubles today stem from the desire of Ratan Tata's desire to assume control of the high profile Indian Hotels Limited -- ironic, given that at the outset, the Tata business empire had flatly refused to finance Kerkar's plans for turning it around.

At the time Kerkar -- one of the 'supermanagers' installed by J R D Tata, and given full freedom to run the different wings of the family empire in their own individual ways -- just went ahead and floated different companies, with different partners, to fund the expansion of the flagship Taj Hotel.

The trick worked, and Kerkar promptly set his sights on Goa which, he figured, could become the next hotspot on the international tourist's itinerary. Again, the Tatas are said to have found the idea a shade too risky to sink their capital in. Kerkar, nothing fazed, just went ahead and raised the capital he needed from, who else, the rich and the famous clientele of the Hotel Taj, to such good effect that the Fort Aguada resort was opened in 1974.

By the eighties, Kerkar had parleyed that once sick hotel into a chain that embraced the US and Europe. In the process, he had also attained iconic status within the chain, commanding the fierce loyalty of his employees right up, and down, the hierarchy.

It is, perhaps, this loyalty that is at the root of Kerkar's migraine today. His troubles began with Ratan Tata's installation at the head of the family empire. Unlike the founding father of the Tata clan, who believed in appointing top-draw managers and giving them their heads -- vide Russi Mody at Tisco, Darbari Seth at Tata Chemicals and Kerkar himself at the IHL -- Ratan Tata proved to be less trusting of his managers.

Kerkar wasn't having any. Given that the Tatas hadn't provided little input, financial or otherwise, into the building up of IHL, the hotelier figured he didn't need Ratan to start telling him how to run his ship.

Then Ratan Tata came up with the rule that the various outposts of the Tata empire should pay the mother company a hefty sum for the use of the Tata brand name -- and again, Kerkar said nix to that.

Kerkar also refused to consider Ratan's idea that the Tata name be incorporated into the IHL brand-name.

The IHL board meeting scheduled for earlier this week -- and intended to nominate Kerkar's successor as company MD -- was, in this context, threatening to develop into a war zone, with Kerkar loyalists taking on Bombay House, headquarters of the Tata empire. And that is when Kerkar got his migraine -- which in turn led the meeting to be postponed at the last minute.

Kerkar's term ends on September 30. Ahead of the meeting, it was expected that he would continue as the company's non-executive chairman.

All hopes of a smooth transition, however, faded when Bombay House nominees R Krishna Kumar, managing director of Tata Tea, and S Ramakrishna, ditto of Tata Industries, were tipped to take over as managing director and deputy managing director, respectively.

Upset that the nominees from within Indian Hotels -- Camellia Panjabi and Leonard Menezes, both executive directors on the IHL board -- were being given a raw deal, Kerkar decided to refuse the post of non-executive chairman. To quit the board. And to make a few telling points on his way out, which would reflect badly on Ratan Tata's management of the empire.

Ratan Tata is apparently not having any. Thus, senior Tata directors are reported in The Times of India on Friday morning of having blowing the whistle on their own, by informing the Reserve Bank of India about alleged foreign exchange violations by IHL and Kerkar.

The Tatas are said to have built up a dossier against Kerkar, planning for the day when the power struggle within the IHL would accelerate into open warfare. Thus, the RBI finds itself possessed of relevant documents relating to two alleged violations -- the first, involving Global Depository Receipts issue by IHL subsidiary Oriental Hotels (which owns the Fort Aguada resort, among other things) to the tune of US $30 million or thereabouts, while the second involves the Taj group's acceptance of dollar deposits from two foreign airlines that have offices in the Taj Hotel, Bombay.

At the time of writing, one thing is clear -- the Kerkar era is effectively over, and Ratan Tata will get his wish when he steps in to the top slot at IHL, with his own nominees holding the two top executive posts.

Meanwhile, Camellia Panjabi is widely tipped to walk out, following on the heels of her mentor Kerkar. Menezes, however, is likely to continue under the new regime.

Bombay House sources indicate that the Tata-Kumar-Ramakrishna axis will come in with a blueprint for the overhaul of IHL, inclusive of a top-level management shakeout.

However, there is nothing to the rumour that Ratan Tata recently met Finance Minister Palaniappan Chidambaram and sought the help of financial institutions for the group's plans to change IHL's top management -- or so affirms, officially, a Bombay House spokesman.

Indications, meanwhile, are that in the coming days, Kerkar's migraine will, if anything, grow worse before it gets any better.

EXTERNAL LINKS: The Taj Group of Hotels