Tata Sons’ Dealings With Group Companies Is Oppressive To Mistry Firms, Mistry Counsel Argues
Tata Sons’ dealings with other Tata companies could be oppressive to the Mistry firms.
The manner in which Tata Sons Ltd. deals with the affairs of Tata group companies is oppressive and prejudicial to the Mistry firms, Senior Counsel Aryama Sundaram argued today at the National Company Law Tribunal.
The Mistry firms’ counsel said Tata Sons, being the holding company of several Tata firms such as Tata Teleservices Ltd., Tata Motors Ltd. and Tata Consultancy Services Ltd. wields significant control over them. The manner in which control has been exercised amounts to mismanagement and has an impact on the economic interest of Mistry firms as shareholders of Tata Sons, Sundaram argued.
Any decision by the Tata Trusts which affects the profitability of group companies could also adversely affect the dividend Mistry firms get as shareholders of Tata Sons, Sundaram explained.
Today was the third day of the Mistry side’s rejoinder in the oppression and mismanagement suit filed by the Mistry firms in their capacity as minority shareholders of Tata Sons, against majority shareholders Tata Trusts.
The tribunal began hearing the petition in November last year after the appellate tribunal granted the two Mistry firms waiver from the 10 percent shareholding requirement to pursue charges. The dispute stems from Mistry’s removal as Tata Sons chairman in October 2016 and later as a director.
In their earlier arguments, counsels of Mistry firms raised issues such as continuance of loss making Tata Nano project and awarding commercial contracts to Ratan Tata’s close confidants like Mehli Mistry and C. Sivasankaran as examples of mismanagement that cost the company several crores and impacted their dividends.
This argument also served as a counter to Tata’s contention that group companies have not been made party to the suit and therefore affairs of these companies cannot form part of the present plea. Sundaram said that the act of oppression was by Tata Sons as they control the affairs of other Tata companies through their shareholding, board nominees or senior executives.
Public To Private Conversion
Tata Sons had conceded in the explanatory statements of its board agenda that it was indeed a public company and not a private company following the introduction of the new Companies Act, Sundaram said. It was argued that the concept of deemed public company, which existed under the old Companies Act, has been removed by the new law. This left Tata Sons with an option to either adopt its public status or convert to a private company once the Act came into force. But Tata Sons only decided to convert last year, Sundaram said.
On conversion, the stringent discipline that is imposed by the Companies Act on a public company will cease to apply, and this will lead to further oppression, he added.
Article 75
Article 75 of Tata Son’s Articles of Association can make tendering shares of Tata Sons by minority shareholder Mistry firms mandatory, if the majority so requires.
Sundaram argued against the validity of this article and said that a shareholder’s right to shares as its property can only be taken away in accordance with company law and any provision in the Articles of Association of a company to the contrary should be void for being contrary to the law. Even if such provision is considered valid, it could still be oppressive and prejudicial to a shareholder.
Somasekhar Sundaresan and Janak Dwarkadas will continue the rejoinders for the Mistry firms. Tata’s replies are also expected to commence tomorrow in the second half.
