Senior counsel Abhishek Manu Singhvi, representing Tata Sons, told the Mumbai bench of the National Company Law Tribunal (NCLT) on Friday that the allegations made by Cyrus Mistry and his family firms of interference from Tata Trusts in the running of Tata Sons cannot be termed interference as Mistry himself sought their advise a number of times. In his arguments, Singhvi said, “Advise as given by R2 and R14 who have given their sweat and blood to Tata Sons and Tata Group cannot amount to interference, more so when such an advise was actively sought by R11 on R11’s instructions”. R2 refers to Ratan Tata, R14 to NA Soonawala and R11 is Cyrus Mistry. Citing a few email exchanges between Mistry and Tata, Singhvi told the NCLT that Mistry as well as the operating companies looked up to Tata and Soonwala post their retirement, in their unique position as former employees of Tata Sons or its directors, or trustees of certain Tata Trusts for guidance from time to time, given their knowledge and experience. “This duality of status has been there for 100 years,” he said.
Reading out a specific document, Singhvi said Mistry had circulated a draft corporate governance code, a month before the day he was replaced, wherein he himself suggested a pre-consultation process with the Tata Trusts and to take the views of Tata Trusts and further lauded the experience of Ratan Tata and NA Soonawala and that one should access their experience. Tatas claimed that Mistry was only making governance a platform “(albeit a false one)” to air his dismay at being replaced.
Singhvi argued that “issues which were proper and normal in the business course pre October 24, 2016, suddenly became weapons of interference and oppression”. Mistry was removed as the chairman of Tata Group on October 24, 2016. Mistry’s counsels in the past argued in the NCLT citing specific instances of constant interference from Tata Trust trustees into the functioning of Tata Sons. They have claimed that in the Tata Power-Welspun renewable business deal, Tata Trust trustee sought price sensitive information, while there was interference during Docomo deal as well.
However, Singhvi challenged the allegation of interference, saying that the interest of Tata Trusts is in that Tata Sons works efficiently so that the value of Tata Trust investments (in it) are protected and provide sufficient income for their philanthropic activities. “There is no incentive for Tata Trusts to interfere with Tata Sons that would be detrimental for Tata Sons and adversely impact the primary source of their own income,” he said. The senior counsel also challenged the arguments put forth by Mistry that the articles of association of Tata Sons are oppressive, and said that they have existed in the company for over 100 years. Moreover, he said recent changes in some other articles (Articles 121 and 121A) had been agreed upon at board meetings of Tata Sons either by Mistry himself or his father. Arguing against Mistry’s claims that the Tata Trusts have an overwhelming representation on the Tata Sons board, Singhvi said that despite having a 66% shareholding, the Articles gave the trusts only one-third representation, “which cannot be construed as oppressive in any manner”.
Referring to one of the articles challenged by Mistry — Article 75, which relates to restrictions on transfer of shares, Singhvi argued that the articles of association of any company are valid so long as it does not violate the law of the land. Citing a few cases, he said that the clauses such as Article 75 have been held legal in the past and challenged Mistry companies to show a legal precedent where clauses like Article 75 have been held invalid. However, the bench sought a response from Mistry’s counsel on the matter, to which Mistry firms’ senior counsel C Aryama Sundaram said, “In a public limited company, whether deemed or otherwise an article restricting the transferability of shares is unenforceable, especially when an article provides for compulsorily sale of shares like Article 75.”
The Tatas have also argued that though Article 75 has been in existence, has never been exercised and therefore the claims of Mistry that it is oppressive to the interest of minority shareholders is invalid. Sundaram, however told the NCLT, “Even if such an article was a valid article, it is capable of being used as a tool of oppression of minority since the majority can coerce the minority to sell their shares, and in the facts of the given case, it can be a justifiable apprehension to be so used”.