Tata Vs Mistry Day 3: Mistry Says He Wanted To Run Tata Sons As A Board-Managed Company
The Cyrus Mistry side argued in the Supreme Court that he was trying to ensure that Tata Sons Pvt. is run as a board-managed company.
Senior Advocate CA Sundaram, who began arguments on behalf of Mistry in the second half of the Thursday, said Tata Sons was being run in a manner that was prejudicial not just to minority shareholders but to the company itself.
The dispute between the Tata Group and the Mistry family stems the sudden ouster of Mistry as chairman of Tata Sons in October 2016. Mistry approached the National Company Law Tribunal alleging oppression and mismanagement. While the NCLT ruled in favour of the Tatas, the order was reversed by the National Company Law Appellate Tribunal. Tata Sons challenged the NCLAT ruling in the Supreme Court.
The Mistry side argued that he was trying to introduce a corporate governance document just before his removal. He, Sundaram said, sought corporate governance and not let nominee directors of the trustees decide on their own. The affairs of Tata Sons, he said, have an impact on other downstream companies as well since they hold a large number of shares in the group entities.
The affairs were being run in a manner that was not prejudicial just to the minority shareholders but to the company (Tata Sons) itself, Sundaram told the three-judge bench, which also comprised Justice AS Bopanna and Justice V Ramansubramanian.
Earlier, Harish Salve argued that to determine oppression it is important to show that there was a lack of probity in the manner in which decisions were being taken which had not happened here. Just some decisions which did turn out as expected could not be used to question the management, Salve said.
The Mistry firms, according to him, were not at all oppressed but were in fact getting their dues and more from Tata Sons, he said.
The right of the minority shareholder is to get dividends which Tata Sons had been doing; and if one went strictly by the numbers, then the Mistry side did not have a right to even get one representation on the board, he argued.
The bench also asked Sundaram today that whether the test to determine oppression of minority shareholders would be evidence of monetary loss or interference with the right of the minority to take a decision. To this, Sundaram said even actions that may lead to a loss of confidence in the manner in which the company’s affairs were being run would qualify.
Conversion To Pvt. Ltd Co. Done To Take Away Protections: Mistry
The Mistry side on Thursday once again questioned the conversion of Tata Sons from a public limited company to private limited.
This conversion, Sundaram told the bench, was done with intent to prejudice protection the minority shareholders would have received by virtue of being a minority shareholder. According to him, the conduct of conversion to a private limited company showed that the minority was being sidelined.
The Companies Act, 2013, further strengthened the protection granted to minority shareholders than what was granted in the earlier 1956 act, Sundaram told the bench.
During previous arguments, Salve defended the conversion, saying after the introduction of the 2013 act Tata Sons became a private limited company by definition.
On Oct. 29, the Mistry side submitted an affidavit in the top court where it suggested a share-swap arrangement in listed entities of Tata Group in lieu of the shares held by them in the unlisted Tata Sons, the holding company of the Tata Group.
The plan of separation proposed by the SP Group included:
A selective reduction of capital at Tata Sons thereby extinguishing shares held by them.
In exchange, SP Group be granted shares in listed companies of the group.
Also, cash consideration or shares for brand value, unlisted assets, etc.
In case, Tata Group didn’t want to part with stocks in a particular listed entity, say for reasons of maintaining a certain shareholding level, according to the separation proposal, SP Group was willing to accept shares of Tata Consultancy Services Ltd. or cash.
Tata Sons on Thursday rejected an offer by billionaire Pallonji Mistry’s conglomerate to swap Mistry family’s stake in the group’s holding company for shares in listed Tata entities.
Accepting the offer would mean spilling the dispute to the other group companies, Tata Sons lawyer, senior advocate Harish Salve, told the Chief Justice of India-headed Supreme Court bench as he resumed arguments in the first half of the third day of hearing on Thursday.
The Supreme Court will continue hearing the arguments on Monday at 2 p.m. Besides Sundaram, senior advocates Shyam Divan and Jana Dwarkadas are likely to argue. For the Tatas, Salve will be followed by senior advocates Abhishek Manu Singhvi and Mohan Parasaran.