Tata Sons rejects Mistrys’ settlement proposal as ‘Nonsense’

NEW DELHI: Tata Sons on Thursday rejected a settlement offer made by minority shareholder Shapoorji Pallonji Group as “nonsense” because the “relief sought as a matter of right” was akin to restructuring of the company.

“Cut to the chase. They are seeking to have the assets of Tata Sons divided so that they can get an 18% share in all Tata companies,” senior advocate Harish N Salve argued for the company before a three-judge bench led by Chief Justice of India SA Bobde. The SP Group’s lawyer, opening his arguments, said they only sought transparent functioning and that the Tata trustees should not run board-operated companies.

The bench was hearing appeals and cross-appeals by the Tatas and the Mistry family of the SP Group against the National Company Law Appellate Tribunal’s decision in December 2019 to reinstate Mistry as executive chairman. The top court has stayed the NCLAT order.


Mistry was ousted by the board as executive chairman in October 2016. Four years later, the SP Group sought separation from the holding company of the Tata Group and said in October that it is ready to swap its 18.4% stake in Tata Sons, which it valued at over Rs 1.75 lakh crore, for shares in listed Tata companies.

“Such an application was terrible at this stage,” Salve argued. He said the Tatas can buy the Mistry family’s stake at a fair value, but what they are asking for is winding up of Tata Sons. They are also asking for a share of the Tata brand value, Salve said as he concluded his arguments against the NCLAT order.

The CJI reacted: “They are demanding compulsory acquisition.”

Opening arguments for Cyrus Investments and Sterling Investments, both SP Group entities, senior advocate CA Sundaram contended that Mistry had objected to two Tata trustees running board-managed Tata companies and had demanded a better governance code.

“Mistry was, in fact, removed the day he was to table a governance code in the board meeting,” he claimed. While he conceded that the removal per se won’t amount to oppression of a minority shareholder, he said the act had destroyed the relationship of confidence and trust between the two groups.

“The SP Group, which had enjoyed management participation for 30 years, was systematically sought to be squeezed out,” he alleged.

Sundaram claimed that under the new Companies Act, a minority shareholder only had to show “unfair treatment” or “prejudice” and not oppression.

“Tata Sons has no other work. Their only income is from the dividend of these (operating) companies. The way Tata Sons is run, snowballs into the way these companies are run and their value lessens, it affects me,” he said.

Seeking to back his claim of prejudice, he said Mistry’s removal was not on the agenda of the board meeting on October 24, 2016. The board had lauded his work and significantly increased his remuneration only three months earlier.

The CJI demanded to know if the unfair conduct alleged was of a magnitude to warrant winding up of the company. Sundaram responded by saying that such a state of affairs in the company cannot continue. “A deadlock is not a sine qua non. The majority can always ride roughshod over the minority,” he said.