Tata Sons rejects Mistry’s share-swap offer, calls it ‘nonsense’

The SP group had valued its 18.37% stake in Tata Sons at Rs 1.75 lakh crore, and asked for pro rata shares in the conglomerate’s businesses.
Ratan Tata and Cyrus Mistry
Ratan Tata and Cyrus Mistry
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In the ongoing fight between the Tata group and the Mistry family, Tata Sons rejected the share-swap offer put forth by the Shapoorji Pallonji group, calling it nonsense. The SP group had valued its 18.37% stake in Tata Sons at Rs 1.75 lakh crore and asked for pro rata shares in the conglomerate’s businesses. Tata Sons valued it at about Rs 1 lakh crore less than the Mistry’s.

Tata’s counsel Harish Salve told the Supreme Court that the Pallonji group proposed dividing assets of Tata Sons so 18% share in all assets and companies goes to them. “It’s nonsense. This kind of relief cannot be granted," he said.

The bench is hearing cross appeals filed by Tata Sons and Cyrus Investments against appellate tribunal NCLAT's order which had restored Cyrus Mistry as the executive chairman of the over $100 billion salt-to-software Tata conglomerate.

In his argument, Salve said that the SP group has asked for 18% in brand value as well, and questioned how it can be rewarded for damaging the Tata brand. The court can only ask Tata to buy out Mistry’s minority stake at a fair market value, he said.

On Wednesday, Tata Sons questioned the accusation of mismanagement at Tata Sons and said that even according to the claim of Shapoorji Pallonji (SP) group, valuation of their 18.37% stake in the company rose from 58,000 crore in 2016 to Rs 1.75 lakh crore in 2020.

The Tata firms told the top court that unless the losses were so enormous and there was a lack of probity which left no other option but to remove the majority shareholders of the company, the NCLAT could not have reached the conclusion including that of restoring Cyrus Mistry as executive chairman.

So, if we go by their claims, it is a strange management which has mismanaged the company but still took their valuation from Rs 58000 crore in 2016 to Rs 1.75 lakh crore in 2020 , Salve had said.

The SP Group earlier submitted in the apex court a plan for separation with the Tatas and said that its 18.37% stake in Tata Sons, the holding company of Tata group firms, was worth Rs 1.75 lakh crore.

The Tatas have said that the event which triggered the present proceedings was primarily on October 24, 2016 when Cyrus Mistry was removed as the executive chairman, months before his term was to end in March 2017.

The apex court had on January 10 granted relief to Tata group by staying the National Company Law Appellate Tribunal (NCLAT) order of December 18 last year by which Mistry was restored as the executive chairman of the conglomerate. Mistry had succeeded Ratan Tata as chairman of Tata Sons in 2012 but was ousted four years later. The court had also observed there were "lacunae" in the orders passed by the NCALT.

On May 29, it had issued notice to Tata Sons and others on a cross-appeal filed by Cyrus Investments Pvt Ltd. The top court on September 22 restrained SP Group and Cyrus Mistry as also his investment firm from pledging or transferring their shares of Tata Sons Pvt Ltd (TSPL).

SP Group, which owns 18.37% in Tata Sons, has said TSPL moved the top court to block its plan to pledge shares for raising funds and that reeked of vindictiveness and oppression of minority shareholder rights.

On September 5, Tata Sons moved the top court seeking to restrain the Mistry group from raising capital against their shares. It sought to prevent SP Group from creating any direct or indirect pledge of shares.

TSPL had earlier told the top court that it was not a 'two-group company' and there was no 'quasi-partnership' between it and Cyrus Investments Pvt Ltd.

TSPL had made averments in an affidavit filed in the apex court while responding to the cross-appeal filed by Cyrus Investments seeking removal of alleged anomalies in the NCLAT order for getting representation on the TSPL's board in proportion to the stakes held by his family.

Mistry had filed an affidavit to the apex court saying the Tata Group had an adjusted net loss of Rs 13,000 crore in 2019 -- the worst losses in three decades.

In his reply to the Tatas' petition challenging his reinstatement by the NCLAT last December, Mistry also demanded that group chairman emeritus Ratan Tata should reimburse all the expenses to Tata Sons since his departure in December 2012 in keeping with best global governance standards.

Mistry is seeking representation in the company in proportion to the 18.37% stake held by his family, the appeal has said.

Reinstating Mistry as the chairman, the NCLAT had also termed the action of the Registrar of Companies to allow conversion of Tata Sons into a private limited company illegal.

With PTI inputs

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