Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

For a moment, it looked like India's Tata Group could stop worrying about a split, and go back to making Jaguar cars, selling Tetley tea, running Taj hotels and writing software for global banks.

On Monday night, Cyrus Mistry -- unceremoniously dumped as group chairman two months ago -- ended his high-decibel bid to hang around at operating companies that had called shareholder meetings to oust him.

But Mistry's resignation from those boards is perhaps only a recognition that he was going to lose the proxy fight. Ratan Tata, who engineered the coup against Mistry at holding company Tata Sons Ltd., won't be resting easy. The founding family's tenuous control of the $103 billion conglomerate can't be taken for granted.

Losing Goodwill
A market-cap-weighted index of Tata Group companies has trailed rival Indian conglomerates
Source: Bloomberg
*27 companies, including Tata Consultancy, Tata Motors, Tata Steel, Titan and Tata Power. *8 companies, including UltraTech Cement, Grasim Industries, Hindalco Industries, Idea Cellular, Aditya Birla Nuvo.

With Mistry promising to shift the battleground, a far messier skirmish lies ahead. The risk is no longer of a split in the empire; now, just by being patient and uncompromising, Mistry could in theory get all of it.

The ousted chairman says he will take the fight to a platform that can uphold the "rule of law." Courts, however, are unlikely to get involved in deciding whether Ratan Tata kept meddling in the operating companies after handing over the reins four years ago.

Similarly, Mistry's insinuations of insider trading might baffle the securities regulator. It would be one thing to show that trustees of Tata Trusts, philanthropic institutions that control two-thirds of Tata Sons, asked and got unpublished, price-sensitive information about publicly listed units, but quite another to prove that any of them enriched themselves or others.

Creditor Alarm
Dollar bonds of Tata Steel and Tata Motors have declined since Mistry was ousted on Oct. 24

Alleged financial fraud and violation of foreign-exchange laws at Tata Group's joint-venture airline with Malaysia's AirAsia Bhd. might pose a more serious challenge, and even ethical lapses that aren't necessarily crimes would serve their purpose. If the fog is thick enough to keep the conglomerate on front pages of newspapers for all the wrong reasons, an irritated government might be forced to intervene in Tata Trusts on the grounds that they have gone astray from their charitable mission.

Assume Ratan Tata is no longer able to control Tata Trusts. Then, as the second-largest investor in Tata Sons -- Mistry's family owns more than 18 percent -- the deposed leader gets to shape the group's destiny.

It won't be that easy. If Ratan Tata, who's back as interim chairman of the holding company, can quickly find a strong successor to look after the empire, he can regain his footing. That would allow him to broach a compromise from a position of strength. There's already a proposal to list Tata Sons. Citigroup Inc. drew up a detailed plan some time back. Implementing it would unlock value for Mistry's shareholding, too.

Whether the deal works depends on Mistry's risk preference: The longer he drags on the conflict, the more the loss of wealth for all shareholders, including himself. But Mistry, 48, has one advantage over his 78-year-old-adversary: time.

The onus to settle the feud is on Ratan Tata, and the younger man must know that, too.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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