Mumbai: Tata Sons Ltd on 5 September moved an ‘urgent’ application before the Supreme Court to restrain the Shapoorji Pallonji Group promoters from raising capital against security of their shareholding in Tata Sons.
Interestingly, this application was moved by the Tata group one day after the SP Group signed definitive documents with a marquee global investor to raise ₹3,750 Crores.
According to the application, Tatas have sought to restrain creation of any direct or indirect pledge on the Tata Sons shares. They have taken the position that any pledge will amount to transfer of shares and under the Articles of Association (AoA) the board of Tata Sons having a right of first refusal to buy at fair market value, the shares of any member who is seeking to sell their shares.
The SP group companies which hold 18.4% stake in Tata Sons through two investment firms have cried foul over the move. They alleged in a statement that this move by Tata Sons will inflict irreparable damage on the SP group. They added that the construction and real estate sector, the main sectors of SP group, have faced the worst impact of the covid-19 pandemic and is in need of funds.
A spokesperson for Tata Sons declined to comment.
The Tata group and SP group are involved in prolonged legal battle starting December 2016, after Cyrus Mistry was sacked as the chairman of Tata Sons in October 2016. The SP group through its investment firms filed a company petition against the Tata group for mismanagement and oppression of minority shareholders at Tata Sons. The matter is presently with the Supreme Court for final adjudication.
“The promoters of the SP Group are in the process of raising ₹11,000 crore from marquee global investors with ₹3,750 Cr being raised in the first tranche, against the security of shares that their investment companies own in Tata Sons. These funds are intended to mitigate the severe stress caused by covid-19 pandemic, deleverage the group’s balance sheet, support its financial obligations and protect the livelihoods of its workforce. This vindictive move by Tata Sons is solely aimed to create delays and roadblocks in the Fund raise that will jeopardize the future of 60,000 employees and over 1 lakh migrant workers who draw sustenance by working at various SP Group facilities,” said an SP group spokesperson.
The SP group is seeking that the apex court dismisses this petition as ‘creation of pledge does not amount to transfer of shares’.
“The ability of Cyrus Investments and Sterling Investments to pledge their shares in Tata Sons in favour of third party is not in any way controlled by the Articles of Tata Sons. This is so because the pledge of shares does not amount to a transfer of the title to the shares, as the title of the shares would continue with the pledgor,” said Justice Srikrishna, former Judge of the Supreme Court, in a statement issued by SP group.
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