Tatas reject Mistrys' settlement offer to divide Tata Sons' assets

Tata Sons' counsel, Harish Salve said the Mistrys are seeking division of assets including 18.4 per cent stake in Tata brand

Just two days after the Tata group had told the Supreme Court that the Mistry family stake in Tata Sons was estimated at 70,000- 80,000 crore against the other camp’s Rs 1.75-trillion valuation, its counsel has rejected the Shapoorji Pallonji (SP) group’s proposal of dividing the assets of the salt-to-software conglomerate.     
 
Tata Sons counsel Harish Salve said in the top court on Thursday that the Mistrys were seeking division of assets including 18.4 per cent stake in the Tata brand. “How can Mistry be rewarded for damaging the Tata brand? The court can only ask Tata to buy out the minority stake at fair market value,” he said. The hearing will resume on Monday.
 
The Mistry family — part of the SP group — had recently offered to sell its stake in the Tata holding company in lieu of shares in the listed Tata companies including in Tata Consultancy Services, Tata Motors and Tata Steel. It had calculated its stake in Tata Sons at Rs 1.75 trillion including its brand value.
 
Tatas had not responded to the offer at that point, saying the group’s response would come in the court.
 
Salve said Mistrys’ proposal seeking division of assets was like winding up of Tata Sons.  “The only way to resolve deadlock is that one of the two sides bows out and only minority can be asked to bow out. Only the Mistrys can be asked to cash out their holding,” he said.
 
During the hearing on Thursday, the SP group counsel CA Sundaram said Cyrus Mistry was removed from the board of Tata Sons as he was going to table a corporate governance document which proposed to regulate Tata Trusts’ role in Tata Sons.
 
Among other things, it was meant to ensure that the two nominee directors of the Trusts don't decide everything about the Tata group companies.
 
Sundaram asked if Tata Sons was a board managed company, why was the company being run only by the two nominees directors of Tata Trusts. “Tata Sons is effectively not a board managed company…. the largest shareholder of Tata Sons is Tata Trusts, which is a public charitable trust, and it is taking all the decisions,” Sundaram said. He argued that the decisions taken by Tata Sons -- if not made correctly -- would affect the downstream companies. This, in turn, will affect Tata Sons shareholders because Tata Sons' only income is from the downstream companies.

 
Under the Companies Act 2013, an action can be prejudicial without being oppressive. The two are distinct, Sundaram said in his arguments.
 
“The issue is the business was being run in a manner which was prejudicial not just to minority shareholders but to the company itself,” he said.
 
The Supreme Court is hearing an appeal filed by the Tata group against an order by the National Company Law Appellate Tribunal (NCLAT) last December.
 
 The NCLAT order had reinstated Cyrus Mistry as Tata group chairman, while terming his successor N Chandrasekaran’s appointment as illegal.
 
A bitter legal and public battle between the two sides erupted when Cyrus Mistry, the scion of the Mistry family, was removed from Tata Sons board as its chairman in October 2016. While the NCLT Mumbai sided with the Tatas, the NCLAT had termed Mistry’s removal as illegal.
 
The matter is now in the Supreme Court.