Tata v. Mistry: Shapoorji Pallonji Group submits scheme for separation from Tata Sons before Supreme Court

The Shapoorji Pallonji Group (SP Group) has filed an application before the Supreme Court detailing a separation proposal seeking division of assets and shares in listed entities of Tata Sons.

. This separation plan filed before the Supreme Court highlights that Tata Sons is a company comprising two groups, of which the Mistry family’s stake stands at 18.37% of the equity share capital. Seeking to sever the decades-old association with Tata Group, the SP group has sought a pro rata division of all assets.

. SP Group has also sought a direct stake in all of the listed entities of the Tata Group and is seeking a pro rata share of the brand value to be adjusted for net debt. The application also proposes the valuation of all the unlisted assets to be done by a neutral third-party agreeable to both the sides.

. SP groups backs its proposal for separation in its application saying,

. “By proposing this remedy the SP group seeks to propose resolution that would take care of the best interests of both shareholders and all the stakeholders of Tata Sons. A separation of interest would equitably give the SP group, as shareholders in Tata Sons, access to their proportionate share of value in Tata Sons and would not let the two warring shareholders to have to live with each other only under the fiat of a Court.” . The proposed separation, the SP Group says, is different from a buy-out under Article 75 of the Articles of Association, which provides for a forced transfer of shares, an inherently oppressive measure. Through its proposal, however, SP Group claims that there are benefits for both sides. This, considering there would be no valuation dispute in a scheme for proportionate separation of assets, while the control would remain with the Tata Group.

. The Mistry family’s stake in each of the listed entities would stand at less than 10%, except in Tata Consultancy Services (TCS), where it is likely to be a little over 13%. Moreover, a “largely non-cash settlement” would also be quicker to implement with minimal disruption to the operating companies.

. The scheme for separation is proposed on the apprehension that the SP Group’s interests as minority shareholders will not be protected in Tata Sons “in the current environment.” Questioning Tata Sons’ actions thus far, SP Group claims that the company has made it clear that it would go to any lengths to prejudice SP Group’s interests which laid down the groundwork for the Mistry family seeking the division.

. The appeals filed by both Tata Sons along with its various entities and Director Emeritus Ratan Tata, as well as Cyrus Mistry, against the December 2019 decision of the National Company Law Appellate Tribunal (NCLAT) through which Mistry was reinstated as the Executive Director of Tata Sons, remains pending before the Supreme Court.

. The Court, while agreeing to hear appeals by Tata and a cross-appeal by Mistry, had clubbed the litigation together, and will hear the same at length.

Earlier this year, the Supreme Court had asked SP Group to maintain status quo as regards pledging of its shares in Tata Sons for raising of funds. Tata Sons had opposed such a pledging on grounds of having the right of first refusal.

.Tata v. Mistry: Supreme Court asks Shapoorji Pallonji Group to maintain status quo on pledging of shares in Tata Group. The Tata-Mistry dispute which reached Supreme Court in January this year is likely to be taken up for hearing on November 2.

Tata v. Mistry: Shapoorji Pallonji Group submits scheme for separation from Tata Sons before Supreme Court

Shruti Mahajan

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