Lawyers arguing on behalf of Cyrus Mistry, former chairman of Tata Sons, told the National Company Law Tribunal (NCLT) on Tuesday, that the largesse given to serial entrepreneur C Sivasankaran aggregated over Rs 1,000-crore of benefits and ranged from management contracts for procurement services, that were not in conformity with industry standard, and shares being allotted at a huge discount.
Lawyers arguing on behalf of Cyrus Mistry, former chairman of Tata Sons, told the National Company Law Tribunal (NCLT) on Tuesday, that the largesse given to serial entrepreneur C Sivasankaran aggregated over Rs 1,000-crore of benefits and ranged from management contracts for procurement services, that were not in conformity with industry standard, and shares being allotted at a huge discount. “Even the subscription being funded by R-1’subsidiary and another Tata Group Company; procuring purchase of Siva’shares by NTT Docomo with an assurance of a put option as if Siva were a Tata Company, and the like,”the affidavit filed in the NCLT read. R-1 refers to Tata Sons, the holding company for the Tata group of companies. The counsel said that at a board meeting held in September, 2016, Mistry had introduced a proposal to litigate against the Siva group to recover nearly Rs 694 crore that Siva owed Tata Sons on account of purchase of shares from NTT DoCoMo. The board of directors of Tata Sons, approved that Tata Sons may litigate against Siva. However, at the very next board meeting Cyrus Mistry was removed from the post of executive chairman, the affidavit said. It is pertinent to note that the Siva’s Company got a discount of Rs 9 per share as immediately after this transaction (i.e. on 08/03/2006 just 10 days) a Government of Singapore owned company called Temasek Holdings was issued shares of TTSL at Rs 26 per share. This resulted in a whopping benefit of nearly Rs 468 crore to Siva in less than two weeks.
Further it is important to note that almost the entire investment of Sterling in TTSL worth over Rs 884 crore was funded by R-1 under the influence of R-2 in following manner: — Rs 650 crore loan from StanChart to Siva was because this was guaranteed by Rs 1 —Rs 132 crore were provided by Kalimati Investments Ltd, a subsidiary of Tata Steel Ltd by way of a temporary inter-corporate loan to Sterling to help him complete the transaction prior to the entry of Temasek. Another case in point with regards to mismanagement, pointed out by Mistry’s lawyers was at Tata Motors with regards to the Nano project. It was pointed out that a director in Ratan Tata’s personal investment vehicle and managing trustee of Tata Trusts, sought and obtained commercially sensitive information from Tata Motors which had the potential to benefit Jayem Auto, a company in which Ratan Tata had made a significant personal investment, and which was directly involved in a transaction with Tata Motors. “Ratan Tata’s conflict of interest in loss making Tata Nano has created a substantial loss to Tata Motors,” C Aryama Sundaram, Mistry’s counsel said.
He also told the bench that the board of Tata Motors in October 2016 had recommended stopping the Nano project. “The continuation of the Nano project for “emotional reasons” post the removal of Cyrus Mistry is an example of ongoing mismanagement of Tata Motors, and through it of Tata Sons,” he said.
In another instance of mismanagement, the senior counsel also pointed out that Mehli Mistry, a close associate of Ratan Tata, secured lucrative long term commercial contracts at the expense of Tata Power. He presented documents on record to allege the manner in which the interests of Tata Sons were compromised through award of several long term lucrative commercial contracts not conforming to industry standards.
“Several such contracts were awarded despite Mehli Mistry not having any prior experience in the contracted job scope. The scale of benefits that were accruing to Mehli Mistry when the prices of Mehli’s contracts were re-negotiated, fell by more than 50%, which resulted in a cost saving of over `200 crore per annum for Tata Power,” he said.