Tata Sons has rejected the contention by Cyrus Mistry’s family-controlled firm Cyrus Investments that Tata Sons is a quasi-partnership between the two. This was part of Tata Sons’ response to the Supreme Court petition filed by Cyrus Investments. According to an Economic Times report, Tata Sons also rejected their claim that members of the Mistry group are entitled to having a representation on the board of the company.
After the Supreme Court stayed an order reinstating Cyrus Mistry as the Chairman of Tata Sons chairman, Mistry moved court earlier this year and filed an appeal against parts of the judgement. He said that his family deserved more relief from the tribunal through the 18.37% it holds.
In his petition Mistry had described their relationship with Tatas as "a quasi-partnership relationship of a vintage of over 60 years, holding 18.37 per cent in the equity share capital of Tata Sons and whose stake is now worth over Rs 1.5 lakh crore".
He had also said that given their shareholding, they should be allowed to nominate directors to the board as well.
In fact, the National Company Law Appellate Tribunal (NCLAT) too, in its order reinstating Cyrus Mistry had termed Tata Sons as a quasi-partnership-company where the Tata Group through the Tata Trusts and other Tata entities and family members holds 81% of Tata Sons’ effective shareholding while the SP Group owns 18%.
A quasi-partnership company is like a partnership between two parties, but not in the true sense where the company would have its articles of association, board of directors, a shareholding pattern like in a company. And in a quasi-partnership company, both parties can validly raise rights under oppression, stake claim over equal rights in terms of having a say and participation in the management.
In its order, NCLAT upheld Mistry’s contention that there was ‘prejudicial’ and ‘oppressive’ actions undertaken by the majority shareholders of Tata Sons against him and his family.
Tata Sons, in its affidavit now, has said that the articles of association of Tata Sons do not give any appointment of directors by proportionate representation and that seeking to amend the AoA to create such rights would mean that it would have to be rewritten, which Tata Sons has termed ‘impermissible’ and ‘contrary to law’.
“...If the appellants are allocated a seat or granted proportionate representation in the BoD (board of directors) and its committees as sought, it would disrupt the existing cohesive functioning of the BoD and have a detrimental effect on the affairs of Tata Sons and all its stakeholders,” an ET report quotes Tata Sons as saying in its filing.
In December, the NCLAT former Tata group Chairman Cyrus Mistry as executive chairman of Tata Group and held the appointment of the current executive chairman N Chandrasekaran as illegal. It had granted the Tatas four weeks’ time to file an appeal.
A few weeks later, Tata Sons moved Supreme Court against the NCLAT order. It also challenged Mistry’s reinstatement as Director on the Board of Tata companies and the declaration of N Chandrasekhar’s appointment as illegal. It also challenged the judgement of the NCLAT where it deemed the conversion of Tata Sons from public to private company to be illegal.
In October 2016, Mistry was ousted as the chairman of Tata Sons. Mistry was appointed as the chairman in 2012 after Ratan Tata announced his retirement. He was the sixth chairman of the massive conglomerate. After his ousting, N Chandrasekhar, who was then the CEO of Tata Consultancy Services (TCS) was appointed as the executive chairman of the group.
What followed is the this long-drawn legal battle between the two parties.