Cyrus Mistry's SP Group Seeks Representation on Tata Sons Board; Shares 3 Letters Written by Ratan Tata
Cyrus Mistry, who represents the Shapoorji Pallonji, has filed a cross plea before the Supreme Court challenging an order passed by the National Company Law Appellate Tribunal (NCLAT) and requested the apex court to grant proportionate representation to SP group on the board of Tata Sons. SP group is second largest stakeholder in Tata Sons with 18.7% stake.
Tata Sons had already filed a plea before the apex court against the NCLAT order.
Seeking more relief from the NCLAT saying that the December 2019 order did not do full justice, the plea filed by Cyrus Investments Pvt Ltd and Sterling Investments Corp Pvt Ltd from the SP group says, "... the majority shareholders as indeed the company have by practice and conduct admitted to the right of the SP group companies to nominate directors on the board.
This is also consequential to the large shareholding of the SP group in Tata Sons, which is in excess of Rs1.5 lakh crore and therefore, on an equitable ground and in order to protect its interests, it is just that the SP group be allowed proportionate representation and thereby permitted to nominate such number of director on the board of directors of Tata Sons as may be in accordance with their equity shareholding, as any decision of Tata Sons affects its shareholding."
Mr Mistry also requested the apex court to delete article 121 of the Tata Sons that "enables select directors to override the views of entire board of directors or alternatively the requirement of an affirmative vote conferred on directors nominated under article 104B should be restricted to matters covered by article 121A and such rights be extended to the majority directors of SP group as appointed..."
Both the Tata Group and the Mistry side had challenged the December 2019 ruling of the NCLAT in the Supreme Court. In January this year, the apex court stayed the NCLAT order reinstating Cyrus Mistry as executive chairman of Tata Sons and restoring his directorships in the holding company as well as three group companies.
In December last year, the NCLAT while reinstating Tata Sons' ousted chairman Mr Mistry, held that the appointment of N Chandrasekaran as his successor was illegal. The appeals court observed the haste in Mr Mistry's removal as chairman of the Tata group's holding company, and this action completely ignored the interest and oppression of minority shareholders.
Cyrus Mistry, a scion of the wealthy Shapoorji Pallonji family that owns a minority stake of 18.7% in Tata Sons, has been locked in a legal battle with Tata Sons and Tata family head Ratan Tata after he was unceremoniously ousted as the chairman in October 2016 in a coup.
According to reports, Mr Tata and Mr Mistry had a fall out over key investment decision. Mr Mistry had taken over as the chairman in 2012 after Mr Tata announced his retirement.
The cross plea filed by the SP group says, "The absence of a nominee from the Shapoorji Pallonji (SP) group of which the Mistry family are a part, on the board of Tata Sons conduct is prejudicial to the SP group whose stake in Tata Sons is valued at over Rs1.5 lakh crore."
"The removal as a director is also prejudicial inasmuch as Tata Sons is a two group companies where the ouster of management participation is contrary to the understanding and arrangement between the Tata group and SP group that led to nominees of the SP group being on the board of Tata Sons for 40 years," the plea contended.
On 26 June 1980, Pallonji Mistry, father of Cyrus Mistry was appointed as nominee director of SP group on the board of Tata Sons. He served as director of Tata Sons for 25 years till 15 December 2014. After this, Cyrus Mistry, who owns 50% stake in SP group, was a director of Tata Sons from 10 August 2006 till 6 February 2017.
Mr Mistry contended that the NCLAT had correctly held that Tata Sons is a quasi-partnership between the Tata grop and SP group and material, like letters, show active consultation and engagement between the two groups.
The plea states that shareholding of Tata Sons is held by two major groups, the Tata group, including Tata Trusts, Tata operating companies and Tata family and the SP group.
The plea mentions three letters written by Ratan Tata to Pallonji Mistry, first in March 1991, soon after Mr Tata became executive chairman of Tata sons, second letter was written in May 2004 and third in January 2005.
The first letter says, "...Our common agreement and mutual faith will foster a true and lasing relationship without any misunderstanding- and in the best interest of Tata Sons as a company. Our standing together will also be a matter of strength...In ending, let me re-iterate that I will never do anything consciously to hurt you or your family..."
In the May 2004 letter, Mr Tata had requested Pallonji Mistry to continue as director of Tata Sons despite reaching the retirement age of 75 years. "In other words," the plea filed by Cyrus Mistry says, "an exception was made on the retirement policy in view of the personal relationship and in order to enable Mr Pallonji Mistry to continue as a director in view of impending initial public offering (IPO) of Tata Consultancy Services Ltd (TCS), a critical time at which Mr Ratan Tata turned to Mr Pallonji Mistry, nominee of SP group, for guidance and counsel."
When Pallonji Mistry retired, in January 2005, Mr Tata in a letter acknowledged his association with the Tata group. Mr Tata in the letter was quoted as saying "Even though you are stepping down at this time, I will continue to keep you informed of the events in Tata sons, and I hope you will permit me, from time to time, to seek your counsel. It would also be my endeavour to keep both Shapoor (Mistry) and Cyrus (Mistry) informed of the affairs of Tata Sons in their capacity as shareholders. I have valued their respective contributions in the companies where they serve as directors and look forward to their continued involvement with the firm in the future."
However, Ratan Tata has rejected claims that his “personal letters of appreciation” to Pallonji Mistry, father of Cyrus Mistry, can be regarded as evidence of a quasi-partnership or any vested legal right in Tata Sons, says a report from Economic Times
Quoting a person close to Mr Tata, the report says, "These letters cannot be called ‘commitment’ or ‘agreement’ after 15 years.”
Last Friday, while admitting the cross plea by SP group, the Supreme Court had asked both the parties to complete their pleadings within four weeks.