The Supreme Court on Tuesday ordered a status quo for creating pledges or encumbrances by Shapoorji Pallonji group on shares of Tata Sons till final hearing on 28 October 2020. During the hearing, the Tata group offered to buy out entire 18.4% stake of SP group in Tata Sons. Soon after the SC hearing, the SP group stated that it was time for them to separate from the Tata group.
A bench of chief justice SA Bobde and justices AS Bopanna and V Ramasubramanian says, "...the parties shall maintain status quo regarding transfer and pledging of shares and further action in regard to transfer and pledging of shares already made.”
During the hearing, senior counsel Harish Salve appearing for Tata Sons contended that SP group company Cyrus Investments Pvt Ltd has pledged 37,122 shares or about 9.2% of its stake in Tata Sons, with Axis Bank and IDBI Bank for a sum of Rs5,074 crore and if not restrained, it may pledge rest shareholding as well.
As per the application submitted by Tata Sons, Cyrus Investments pledged 30,318 of the total 37,122 ordinary shares, which is 82% of its shareholding in Tata Sons, to secure debenture series issuance of Rs825 crore in favour of Axis Bank, which stood later modified to secure a total amount of Rs3,957 crore in April. Later in March, Cyrus Investments pledged 6,804 shares of Tata Sons with IDBI Bank to raise Rs1,117 crore.
Later, in a release, the SP group stated that it was time for the group to separate from Tata group. "It is extremely unfortunate that the current leadership of Tata Sons has not only continued to take value destructive business decisions in a misguided effort to prove a point in these proceedings.”
"The current situation has forced the Mistry family to sit back and reflect on the past, present and possible future for all stakeholders. The past oppressive actions, and the latest vindictive move by Tata Sons that impact the livelihoods of the wider SP Group community leads to the inexplicable conclusion that the mutual co-existence of both groups at Tata Sons would be infeasible. The SP-Tata relationship spanning over 70 years, was forged on mutual trust, good faith, and friendship. Today, it is with a heavy heart that the Mistry family believes that a separation of interests would best serve all stakeholder groups," the SP group says in the release.
Earlier this month, Tata Sons had filed an urgent petition before the apex court requesting to restrain SP group from raising capital by pledging their shares in the holding company.
SP group is second largest stakeholder in Tata Sons with 18.7% stake, which is valued at over Rs1.5 lakh crore.
In July this year, Cyrus Investments, part of the SP group submitted in Supreme Court, "Tata Sons is a public company and not a dejure private limited company. Material facts related to collection of deposits from the public, withheld".
It also stated that Tata Sons and its board of directors withheld material facts from the shareholders in resolution of the proposed conversion, the National Company Law Tribunal (NCLT), and Registrar of Companies (RoC) that it had collected deposits and consciously elected in the filings made with the RoC filed under Rule 10 of the Companies (Acceptance of Deposit), Rules 1975 that it was a public company.
"On the sheer falsity of these assertions, this Hon’ble Court out not only to declare the purported conversion to be illegal but also censure the board of Tata Sons for its conduct", Cyrus Investments had told the apex court.
Cyrus Mistry, a scion of the wealthy Shapoorji Pallonji family that owns stake 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.
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.