Supreme Court of India (SC).
The Shapoorji Pallonji Group’s 18.4 percent stake in Tata Sons is not worth more than Rs 80,000 crore, senior advocate Harish Salve representing the Tatas told the Supreme Court in a hearing on December 8.
The Mistry group had earlier claimed that the value of its stake in Tata Sons exceeded Rs 1.75 lakh crore.
The differences over the valuation could prove detrimental to the cash-strapped SP Group, that has been locked in a legal battle with the Tatas since Cyrus Mistry’s unceremonious removal as Tata Group chairman in 2016.
The SP Group had on October 29 this year, submitted a plan of separation to the Supreme Court, seeking to end its seven-decade-long association with the Tata Group. In the submission to SC, SP Group had demanded non-cash settlement in form of shares in all listed Tata entities where Tata Sons owns a stake – basis pro-rata split of listed assets (per known share price value) and pro-rata split of the brand (as per valuation done and published by Tatas).
Reports suggested Tata Sons had offered to buy out SP Group’s stake in its holding company to help the group raise money to pay its debt.
Cyrus Mistry had also sought his reinstatement as the Chairperson of the Tata Sons.
When Cyrus Mistry chalked up a shock victory in Tata feud
“Mistry was not appointed as Executive Chairman not under any right of the minority shareholder. Even otherwise, only Mistry personally can have grievance (due to removal) and not minority shareholders,” Bar and Bench quoted senior counsel Harish Salve arguing in Supreme Court
Salve said Cyrus Mistry’s appointment as Executive Chairman was only up until March 2017 and not for a lifetime, pointing out that between 1965 and 1980 nobody from Pallonji group was on the Board of Tata Sons. Cyrus Mistry’s father Pallonji Mistry was included in Tata Sons as non-executive Director in 1980 and Cyrus Mistry joined Tata Sons in 2006.
Salve argued that Mistry was only given a designation, not a post. He said: “Many times companies don’t have an executive chairperson and the senior-most director presides over the board.”
The senior counsel said Mistry was not appointed as Executive Chairman under any right of the minority shareholder. Even otherwise, only Mistry personally can have grievance (due to removal) and not minority shareholders, he added.
Citing sections 241/242 of the Companies Act, Salve said Section 241 provides for an application to Tribunals when the affairs of the company are conducted in a manner prejudicial to the public interest or in a manner oppressive to any member of the company.
However, he said that in the case of Tata Sons, Section 241 cannot be based on a litany of allegations against downstream companies. “It might at the most be a bad decision but not mismanagement,” Salve said to CJI Bobde.
Salve concluded that a member of Tata Sons cannot contain about other Tata companies. There has never been a single allegation of mismanagement of Tata Sons. He said the tribunal (NCLAT)’s power to appoint directors under section 242(2)(k) is nuanced for specific purposes.
“With 18 percent, in normal corporate democracy, Mistry would not even be able to get one director on the board and the 68 percent shareholder will be able to pack the board,” Salve said.
The senior counsel even read out various precedents on the scope of ‘just and equitable’ reasons as a ground for winding up states that the standards for applying the principle are ‘high’. “Nobody can capture exhaustively what are “just and equitable” grounds for winding up,” he said.
With the proceeding went on, Salve concluded that the ‘judge has to see whether oppression is of such degree and accompanied by lack of probity to such an extent that the judge has to either wind up the company or pass such orders to remedy the situation’.
Following this, CJI SA Bobde concluded the hearing for the day. Harish Salve requested for an hour to argue, while Dr AM Singhvi said he will take at least two hours. Meanwhile, Shyam Divan stated he will take a day.
Earlier on December 18, 2019, NCLAT had ordered the reinstatement of Cyrus Mistry as the Chairperson of Tata Sons. This was challenged by Tata Sons. Following this, the Supreme Court had on January 10, 2020, stayed the NCLAT order.
