Mumbai: Tata Sons Ltd filed an “urgent” request with the Supreme Court on 5 September to prevent the promoters of the Shapoorji Pallonji Group from raising capital with the guarantee of their stake in Tata Sons.
Interestingly, this request was moved by the Tata group one day after the SP Group signed the final documents with a global marquee investor to raise ₹3,750 Crores.
According to the request, Tatas has tried to restrict the creation of any direct or indirect pledge on the shares of Tata Sons. They have taken the position that any pledge will amount to the transfer of shares and, according to the Bylaws (AoA), the board of Tata Sons has the right of first refusal to buy at fair market value, the shares of any member seeking to sell their Actions.
SP group companies that have an 18.4% stake in Tata Sons through two investment firms have lamented the move. They claimed in a statement that this move by Tata Sons will inflict irreparable damage to the SP group. They added that the construction and real estate sector, the main sectors of the SP group, have faced the worst impact of the covid-19 pandemic and need funds.
A Tata Sons spokesperson declined to comment.
The Tata Group and the SP Group are involved in a protracted legal battle beginning in December 2016, after Cyrus Mistry was fired as Chairman of Tata Sons in October 2016. The SP Group, through its investment firms, filed a company petition against the Tata group for mismanagement and oppression. minority shareholders of Tata Sons. The matter is currently in the hands of the Supreme Court for its final decision.
“The promoters of Grupo SP are in the process of raising ₹11 billion rupees from major global investors with ₹3,750 Cr were raised in the first tranche, against the guarantee of the shares that its investment companies own in Tata Sons. These funds are intended to mitigate the severe stress caused by the covid-19 pandemic, deleverage the group’s balance sheet, support its financial obligations and protect the livelihoods of its workforce. This vengeful move by Tata Sons is aimed solely at creating delays and obstacles in fundraising that will jeopardize the futures of 60,000 employees and more than 1 lakh of migrant workers who earn a living working at various SP Group facilities, “said a group spokesperson SP.
The SP group wants the higher court to dismiss this petition because “the creation of a pledge does not amount to a transfer of shares.”
“The ability of Cyrus Investments and Sterling Investments to pledge their shares in Tata Sons in favor of a third party is in no way controlled by the Tata Sons Articles. This is because the pledging of shares does not amount to a transfer of title to the shares, as the title of the shares would continue with the pledge, “said Justice Srikrishna, a former Supreme Court judge, in a statement issued by the SP group.
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