The Tata group has estimated that the valuation of the Mistry family’s 18.4 percent stake in Tata Sons ranges from Rs 70 billion to Rs 80 billion compared to Rs 1.78 trillion sought by the family.
During today’s Supreme Court hearing, Tata Sons lawyer Harish Salve mentioned that the Mistry family’s shares are worth Rs 70,000-80,000 crore and that a Tata Sons member cannot make allegations about other companies. of the group.
Arguing on behalf of the Tata Sons, Salve said that the Tata group was astonishingly managed by its former chairman Ratan Tata and during his tenure between 1991 and 2012, Tata’s market capitalization jumped 500 times. “When there is a 500 percent growth story, there will be some winning projects and some losing projects,” Salve informed the court. “The fact that some companies have losses does not imply that there is mismanagement at Tata Sons,” argued Salve.
The Supreme Court is hearing an appeal filed by the Tata group against an order from NCLAT in December last year that had not only reinstated Cyrus Mistry as the former president of the Tata group, but also qualified the appointment of Mistry’s successor, N Chandrasekaran, as illegal.
Salve said NCLAT had rescinded Chandra’s appointment even though Mistry and the Pallonji group had never opposed the appointment. The NCLAT ruling has gone beyond the scope of judicial review, he said.
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In reinstating Mistry, Salve said that NCLAT had given control of Tata Sons to minority shareholders and gave them power to govern all of Tata’s companies. “As minority shareholders are entitled to dividends, as long as Tata Sons distributes large amounts as dividends, where is the issue of liquidation?” Salve asked.
On the Tata Sons bylaws, which grant veto powers to the Tata Trusts, Salve argued that NCLAT does not have powers to rewrite the bylaws and, although it has powers to remove the president, the selection of the president must be made. by its shareholders. If the numbers rule is allowed, Mistry won’t get a single seat on the board. Tata Trusts owns a 68 percent stake in Tata Sons.
Salve said that any major loss to the group will also affect majority shareholders, not just minority shareholders. Salve said that Tata Sons has always been a limited liability company since 1917 and that the NCLAT overlooked the fact that the bylaws are the primary contract between the shareholders and the company. The charter changes, which grant veto powers to the Tata Trusts, were approved by Pallonji Mistry, the Mistry family patriarch, when he was a director of the company, Salve said.
In 2000, the Tata Sons AsA was reformulated and replaced by a new set of articles duly approved by a special shareholder resolution. The AoA granted certain special rights to Tata Trusts, including the right to nominate up to one-third of the directors (Article 104B) and their nominated directors have the right to vote in the affirmative (Article 121). The AoA said that these rights will exist only as long as the Tata Trusts owns no less than 40% of the capital stock of Tata Sons.
These rights were mainly incorporated to protect the interests of the Trust in the future, in the event that its shareholding was diluted.
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Interestingly, these modifications to the AoA were unanimous without any objection from any shareholder. The SP Group voted in favor of these amendments. In 2012 and 2014 new modifications were made without raising objections from shareholders.
The 2014 amendments added two new articles: article 121A which required that certain matters should be decided solely by the Board of Directors, and article 121B, which empowered any member of the Board of Directors to present, 15 days in advance, any matter or resolution for deliberation and consideration by the Tata Sons Board.
Even when the AoA was further modified, in 2012 and 2014, when Cyrus Mistry was a director of Tata Sons and also its president), SP Group did not demand or assert any special rights for itself.
After Mistry was removed from the board in October 2016, Mistry’s group raised these issues at the NCLT and then at the NCLAT. While NCLT ruled in favor of the Tata group, the NCLAT ruled in favor of the Mistrys.
The hearing at the SC will continue tomorrow.
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