On Tuesday, the Supreme Court held Shapoorji Pallonji Gruppe in the course of a final hearing on the Tata Mistry Legal Tussle on Tuesday withheld or transferred its shareholdings in Tata Sons for raising money from the market and for taking further action regarding the pledging / transferred shares.
Senior Advocate Harish Salve appeared for Tata Sons and said that SP Group company Cyrus Investments, representing 9.2% of Tata Sons shareholding, committed 37,122 shares of Axis Bank and Axis bank to IDBI Bank in the amount of Rs 5,074 and that the SP Group could proceed alongside its other shareholdings or that the group was a party to the protest.
Salve said that before the order of SC’s January 10, resignation of the NCLAT verdict reinstating the Cyrus Mistry in the capacity of chairman of Tata Sons, SP party and Mistrys had not come to court clesanly. On 10 January, however, the plaintiffs played a victim card, telling the court that Tata Sons was armwisting it to sell its full 18.4 percent interest to Tata Sons by invoking Article 75 of the Articles of Association, which grants Tata Sons the right to first decline.
He said that the majority shareholding of the Tata Group belonged to Public Caritative Trusts that could be further sold in case SP Group was unable to repay the pledge money could threaten the group’s structure , culture and ethos. The majority shareholding was held by Tata Sons Public Charitable Trusts.
Though senior lawyer CA Sundaram opposed any provisional order and endorsed the hearing, the bench said that “in the meantime the parties are to preserve the status quo regarding transfers and commitments of shares as well as further action in connexion with transfers and purchases of shares already made.”
In its request to secure the total debenture series issuance of Rs 825 Crore in favour of Axis Bank, subsequently changed to guarantee a full sum of the total amount of Tata Sons within 17 days of order No 10th January of the SC, Tata Sons announced that Cyrus investment pledged 30.318 out of a total of 37.122 common shares (which is 82% of their shareholder in Tata Sons)
On 19 March Cyrus Investments promised to secure Rs 1,117 crore on 6,804 shares to support IDBI Bank, it said. “Setting up such a high value pledge in this way is an utter derogation from the Spirit of the SC ‘s order of January 10, without telling Tata Sones nor seeking SC leave. In addition, SP Group demanded a chicanery, because the company had given a good faith commitment to the SC to refrain from exercising its right to SP Group or Cyrus Investments under Article 75 of the Articles of Association, “Tata Group said.
“Cyrus Investments and Sterling Investment have indeed accumulated a large shareholding shareholding in bonus issues and in rights issues, according to the Tata Group, in its appeal against the NCLAT order. While Cyrus and Sterling only invested Rs 69 crore, from 1991 to 2016, the dividends of around Rs 872 crore were received from Tata Sons.
SP Group purchased 40 common shares and 48 preferential shares of its paid-up share capital for the first time in 1965 as shareholders of Tata Sons. “Thereafter over the years Tata Sons’ shareholding (mostly by incentives and share rights) was acquired by Cyrus Investments and Sterling Investment, which allowed them to gain significant economic benefits,” the petition said.