Shapoorji Pallonji Group Sends Notice To Tata Sons Seeking Damages
A Tata Motors Ltd. Badge is displayed on a vehicle outside the Prabhadevi Concorde Motors India Ltd. dealership in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Shapoorji Pallonji Group Sends Notice To Tata Sons Seeking Damages

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The Shapoorji Pallonji Group, which has been in a bitter legal battle with the Tatas since October 2016, has sent legal notices seeking damages from Tata Sons and its board members for "illegally blocking" the Mistry family's bid to raise funds by pledging shares of the Tata Group’s key holding company Tata Sons.

The SP Group, which owns 18.37% of the privately-held Tata Sons, valued at over Rs 1 lakh crore, has sought damages from Tata Sons board members, both individually as well as collectively, for their complicity in illegally blocking the Mistry family from raising funds against the security of Tata Sons shares that they own.

The legal notice, sent on Sept. 15 through the SP Group lawyers Desai & Diwanji on behalf of Sterling Investment Corporation and Cyrus Investments, has given them three days to respond failing which legal action seeking damages would be initiated.

The notice said their action blocking pledging of Tata Sons shares is not only a flagrant abuse of the process of law but is also misconceived and misleading.

“With your action, you have rendered yourself liable for damages, apart from being responsible for aiding, abetting and fomenting vexatious litigation without basis, and thereby putting at risk the lives and employment of tens of thousands of workers in dire times of the pandemic-induced socioeconomic stress,” the legal notice stated.

The notice further said, “Their malafide actions were aimed to financially stifle our clients and their operations, and with your false claims you have sought to create panic among lenders and financial institutions and cause colossal damage to our clients.

"We have nothing to comment upon,” a Tata Sons spokesperson told PTI.

The noticees are the Tata Sons board, chairman N Chandrasekaran, and board members Farida Khambhata, Venu Srinivasan, Ajay Piramal, Ralf Speth, Bhaskar Bhat, Harish Manwani, and Saurabh Agrawal, along with company secretary Suprakash Mukhopadhyay.

Also read: Cyrus Mistry Argues NCLAT Right To Reinstate Him As Tata Sons Chairman

On Sept. 3, the Tatas had moved an urgent petition in the Supreme Court seeking to block the SP Group from pledging the shares they own in Tata Sons to raise Rs 3,750 crore from Brookfield. The Tata action came just a day after the Mistrys inked a fund-raising deal with the Canadian fund house.

Again on Sept. 5, the Tatas submitted an urgent petition on the same. Following this, on Sept. 7 the Mistrys moved the apex court with a counter-petition. The legal notice also seeks an explanation from board members, particularly the independent directors, whether the oppressive action that has caused prejudice to a minority shareholder, was with their concurrence or not.

The SP Group in their counter affidavit to Tatas’ application to block pledging of shares informed the apex court that there was no restriction in Tata Sons’ Articles of Association that prohibits share-pledging, It said that the lending documents entered into by the SP Group had a specific covenant that lenders would comply with the articles in the event of pledged shares being invoked and that the Tatas intentionally misled the Supreme Court by suppressing this vital information.

The Mistry firms said the Tatas' application to block funding, one day after a definitive document was signed with Brookfield, showed the vindictive, prejudicial and oppressive nature of action by Tata Sons.

Also read: Why Shapoorji Pallonji Group Is Facing A Tough Time In Credit Markets

The agreement with Brookfield was part of the SP Group's Rs 11,000-crore fund-raising plan for the year as its flagship EPC and realty verticals were facing liquidity issues due to the pandemic. The SP Group was planning to raise Rs 11,000 crore from various funds and had signed a deal with a marquee Canadian investor for Rs 3,750 crore in the first tranche against a portion of their 18.37% stake in Tata Sons.

In their submission to the court, the Mistry family had said the blocking of their share-pledge plan for fundraising reeked of vindictiveness and oppression of minority shareholders’ rights. The Tatas had told the Supreme Court that the Mistry side had since January 10, 2020 pledged almost 82%of their 18.34% holding in Tata Sons, first for Rs 825 crore with Axis Trustees which was then increased to Rs 3,957 crore by April but did without disclosing this to the Supreme Court or to Tata Sons.

This fresh dispute between the two sides takes place even as the Tata Group have filed an appeal in the Supreme Court against a judgment of the National Company Law Tribunal that found oppression and mismanagement by the group and ordered the restatement of Cyrus Mistry as executive chairman of Tata Sons. In 2016, Mistry had been abruptly dismissed from chairmanship by the company’s board.

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