No relationship of trust with SP Group, Tata Sons tells SC

Counters Mistry’s claim in rejoinder to his cross appeal

Tata Sons Private Limited on Thursday denied in the Supreme Court of having any relationship of a “personal character” with Shapoorji Pallonji (SP) Group, a minority shareholder and the company of its ousted chairman, Cyrus Mistry.

“There is no relationship of a personal character involving trust and confidence between the two groups,” Tata Sons said in its rejoinder to a cross appeal filed by Mr. Mistry against a National Company Law Appellate Tribunal (NCLAT) judgment, in December 2019, reinstating him as chairman of Tata Sons. Mr. Mistry however said the NCLAT verdict does not, in fact, secure the interests of his company from prejudicial conduct in the future from the Tata Group.

Mr. Mistry had described the relationship between the Tata Group and the SP Group as one running on the “principle of quasi-partnership”. He termed it a relationship built on trust. His appeal said SP Group had been “a guardian of the Tata Group for over six decades”. The SP Group is the single largest non-Tata shareholder with 18.37% equity in Tata Sons.

In its 162-page rejoinder, Tata Sons said there is “no quasi-partnership between the Tata Group and the SP Group”. It said this was a “complete after-thought” on the part of Mr. Mistry’s company. “Tata Sons is not a two-group company consisting of Tata Group on one hand and SP Group on the other… the rejoinder said.

It said there is no “amorphous” Tata Group consisting of seven Tata Trusts, seven Tata Operating Companies and other individuals who bear the surname ‘Tata’.

“This bucketing together of Tata Trusts, companies and individuals effaces the identity of the individual shareholders who are members in their own right and capacity and not part of any group,” the rejoinder said.

It said there is no “understanding”, as claimed by Mr. Mistry’s side, that the SP Group would participate in the management of the Tata Sons and the Tata Operating Companies.

Tatas Sons denied the allegation that it is an “alter ego” of its majority shareholder, Tata Trusts. Mr. Mistry had argued that Tata Sons should remain neutral party and not take a stand in a dispute between two shareholders.

But Tata Sons said it has no intention to “sit at the fence” and not take a stand in the proceedings.

“Tata Sons is managed by a board of directors whose wonky motivation is to ensure that the interests of Tata Sons are not compromised or prejudicially affected as a result of the litigation… Stand of Tata Sons is the reflection of the stand of its Board of Directors,” the reply said.

It finally said the NCLAT acted in excess of its jurisdiction by directing the reinstatement of Mr. Mistry as chairman at a time when he had already been “removed” as Director of Tata Sons on February 6, 2017.

The NCLAT decision to restore him to his “original position” for the “rest of his tenure” was contrary to company law, a recipe for disaster and sets a dangerous precedent in law, the Tatas had argued.

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