Cyrus Mistry
Cyrus Mistry

The Tatas in the Supreme Court on Thursday opposed as "nonsense" the Shapoorji Pallonji Group's proposal that its 18.37 per cent stake in the Tata Sons, which it claims to be worth Rs 1.75 lakh crore, be swapped with the shares in the Tata group's listed companies.

The share-swap separation proposal of the S P group was rejected by the Tata group before a bench headed by Chief Justice S A Bobde which is hearing the final arguments on the cross appeals filed by Tata Sons and Cyrus Investments against appellate tribunal NCLAT's order.

The NCLAT had restored Cyrus Mistry as the executive chairman of the over USD 100 billion salt-to-software Tata conglomerate. The SP group is seeking pro-rata shares in Tata group's listed companies in lieu of its 18.37 stake in Tata Sons Private Ltd (TSPL), the holding company of group firms. "It is nonsense. This kind of relief cannot be granted," senior advocate Harish Salve told the bench, which also comprised Justices A S Bopanna and V Ramasubramanian.

He said that accepting such an offer could spill over to other Tata group's listed firms where the SP group would be again holding minority stakes. On the third day of the hearing, senior advocate C A Sundaram, appearing for Cyrus Investment, commenced submissions after Salve concluded his arguments. Sundaram referred to legal provisions and said, "The whole conduct by which Tata Sons was made a private limited company showed that minority shareholders (SP group) was being sidelined".

"The act of converting the company from public to private was to prejudice me because the protection afforded by virtue of being public were taken away," he said. The bench then sought to know, "You will have to show us what were the precise actions which caused prejudice or oppression to you (SP Group)."

Sundaram said that justifiable loss of confidence in the management or exclusion from management in quasi partnership are grounds for winding up of a company on just and equitable grounds. He referred to the long past association of the SP Group with the Tatas and said that Tata Sons is just an investment company which does not do any business on its own, but its directors take decisions for the downstream group firms.

Dealing with the reason for the feud between Mistry and Tata Sons, he said, "the whole thing came to a head because Mistry was going to table a Corporate governance document which proposed to regulate the Tata Trusts' say in the Tata Sons so that two nominee directors don't decide everything" for group companies. The problem is anything done by any group companies like TCS or Tata Motors is finally decided by the Tata Sons, he said, adding that usually such decisions are taken by the board of the company concerned.

"If these companies want to take a decision then Tata Sons has a role to play in these decisions," he said. The bench asked: "I hope Mr Cyrus is not party to any of the communications with regard to operation of these companies.Salve said that he was party to many of these decisions." The bench asked the SP group to give a list of decisions where the Tata Sons had taken.

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