Fresh twist in Tata-Mistry tussle: Hours after SC orders status quo on shares, SP group says ‘time to separate’

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This development comes just hours after the Supreme Court restrained till 28 October the SP group and Cyrus Mistry from pledging or transferring their shares in Tata Sons Pvt Ltd

The tussle between Tata and Mistry saw a fresh twist on Tuesday evening with the Shapoorji Pallonji (SP) group controlled by billionaire Pallonji Mistry and his family, the largest minority stakeholder in Tata Sons, releasing a statement saying it is ‘time to separate from Tata’.

This development comes just hours after the Supreme Court restrained till 28 October the SP group and Cyrus Mistry from pledging or transferring their shares in Tata Sons Pvt Ltd.

During today’s apex court hearing, Tata Sons offered to buy out Shapoorji Pallonji group’s stake in the holding company to help the group raise money to pay its debt, as per Economic Times.

The Mistry family owns an 18.37 percent stake (valued at over Rs 1 lakh crore) in Tata Sons, India’s largest business house.

As per Livemint, the SP group statement began, “Today, Shapoorji Pallonji Group stated before the Supreme Court that separation from Tata Group is necessary due to potential impact this continuing litigation could have on livelihoods and the economy.”

“It is extremely unfortunate that the current leadership of Tata Sons has not only continued to take value destructive business decisions in a misguided effort to prove a point in these proceedings. It is a matter of public record that several issues identified years earlier, continue to plague the group. Be it the operations of Tata Steel UK, where over the last three years alone the operational losses have increased by an additional 11,000 crores, or the Group’s aviation businesses,” the statement read.

As per Bloomberg Quint
, the statement further read, “The current situation has forced the Mistry family to sit back and reflect on the past, present and possible future for all stakeholders. The past oppressive actions, and the latest vindictive move by Tata Sons that impact the livelihoods of the wider SP Group community leads to the inexplicable conclusion that the mutual co-existence of both groups at Tata Sons would be infeasible. The SP-Tata relationship spanning over 70 years was forged on mutual trust, good faith and friendship. Today, it is with a heavy heart that a separation of interests would best serve all stakeholder groups.”

As per PTI, the SP group earlier today the Supreme Court that Tata moving the apex court to block its its plan to pledge shares for raising funds reeked of vindictiveness and oppression of minority shareholder rights. Tata Sons had on 5 September, moved the top court seeking to restrain the Mistry group from raising capital against their shares.  The SP Group was planning to raise Rs 11,000 crore from various funds and had signed a deal with a marquee Canadian investor for Rs 3,750 crore in the first tranche against a portion of its stake in Tata Sons.

In a hearing conducted through video conferencing, the top court said that it would hear the plea after four weeks and “in the meantime, parties shall maintain status quo regarding pledging/transfer of shares”. “We will say status quo on transferring/pledging and any further action with regard to transfer/pledge already made,” the bench said.

Senior advocate C A Sundaram, appearing for the SP group, said they were being stopped from pledging the shares and “it is creating havoc for me”.
On the other hand, senior advocate Harish Salve, representing Tata, said that the point was “something else” as the Tata has a right to buy the share at market price, but the SP group was pledging them. “We are of the view tentatively that pledging is a limited transfer,” the bench observed while saying that it will “conduct final hearing in four weeks”.

Earlier, the TSPL had told the top court that it was not a ”two-group company” and there was no ”quasi-partnership” between it and Cyrus Investments Pvt Ltd. TSPL had said this in an affidavit filed in the apex court while responding to the cross-appeal filed by Cyrus Investments seeking removal of alleged anomalies in NCLAT order for getting representation on the TSPL”s board in proportion to the stakes held by his family.

The apex court had on 10 January granted relief to Tata group by staying the National Company Law Appellate Tribunal (NCLAT) order of 18 December, by which Cyrus Mistry was restored as the executive chairman of the salt-to-software conglomerate.

Then, the top court had on May 29 issued notice to TSPL and others on a cross-appeal filed by Cyrus Investments Pvt Ltd. Cyrus Mistry had also filed an affidavit to the apex court saying the Tata Group had an adjusted net loss of Rs 13,000 crore in 2019, the worst losses in three decades.

In his reply to the Tatas’ petition challenging his reinstatement by the NCLAT last December, Mistry had also demanded that group chairman emeritus Ratan Tata should reimburse all the expenses to Tata Sons since his departure in December 2012 in keeping with best global governance standards.

Mistry, the ousted chairman of Tata Sons, is seeking representation in the company in proportion to the 18.37 percent stake held by his family, the cross-appeal has said. In its affidavit filed in the top court, Tata Sons has alleged that the thrust of Cyrus Investments” focus “has now shifted to propagating the quasi-partnership theory to secure the relief of ‘proportionate representation”.”

In the petition, the appellant (Mistry group firm) has described the group’s relationship with Tatas as “a quasi-partnership relationship of a vintage of over 60 years, holding 18.37 percent in the equity share capital of Tata Sons and whose stake is now worth over Rs 1.5 lakh crore”.

According to the petition, the Mistry group firm has sought remedies for many anomalies in the NCLAT order, including not looking at alleged oppression of minority shareholders as well as converting Tata Sons into a private limited company as a post-facto move. As per the petition, the tribunal order clearly and unequivocally found the prejudicial conduct by Tata Sons, but failed to provide certain important reliefs that would have put an end to the oppressive conduct of the majority shareholder.

Reinstating Mistry as the chairman, NCLAT had also termed the action of the Registrar of Companies to allow conversion of Tata Sons into a private limited company illegal. Mistry had succeeded Ratan Tata as chairman of Tata Sons in 2012 but was ousted four years later. While taking note of appeal of Tata group on January 10, the apex court had stayed the NCLAT order restoring Mistry as executive chairman of the Tata Group, observing that there were “lacunae” in the orders passed by the tribunal.

With inputs from PTI

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