Shapoorji Pallonji Group seeks damages from Tata Sons’ board for blocking fund raising deal

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September 18, 2020 4:30 AM

The notice, which gave three days time to the board members to respond, also asked them, particularly the independent directors, to whether oppressive action that causes prejudice to a minority shareholder was with their concurrence.

Both groups traded charges with the Ratan Tata camp alleging Mistry had mismanaged the affairs of the group,which Mistry countered showing how the Tata Group had suffered because of several acquisitions.Both groups traded charges with the Ratan Tata camp alleging Mistry had mismanaged the affairs of the group,which Mistry countered showing how the Tata Group had suffered because of several acquisitions.

The Shapoorji Pallonji Group on Thursday slapped a notice for damages against Tata Sons’ board members, individually and collectively, questioning their decision to block the Cyrus Mistry family from raising funds against the shares they hold in the Tata group firm.

The Mistry family run firms — Cyrus Investment and Sterling Investment Corporation — stated that Tata’s application to block funding in the Supreme Court, after definitive documents were signed with a global investor (to raise `3,750 crore), showed the “vindictive, prejudicial and oppressive nature.”

The SP group’s notice came pursuant to Tata Sons filing an urgent application in the Supreme Court to restrain the promoters of the Shapoorji Pallonji Group from raising funds by pledging Tata Sons shares as security. Tata Sons had sought a direction to the SP group, which owns 18.32% in Tata Sons, “to disclose on affidavit all the pledges, encumbrances or charges, direct or indirect, that may have been created” upon its shares or the shares of the two Mistry firms.

The Mistry group stated that there was no restriction in the Articles of Association (AoA) of Tata Sons which prohibit the pledging of shares. Besides, Tatas had failed to disclose a crucial fact that the lending documents entered into by the SP group had a specific covenant that lenders would comply with the AoA of Tata Sons in the event that a pledge of shares were ever invoked, it said while alleging Tatas of “intentionally misleading the Supreme Court by suppressing the vital information.”

The notice, which gave three days time to the board members to respond, also asked them, particularly the independent directors, to whether oppressive action that causes prejudice to a minority shareholder was with their concurrence.

Under the Companies Act, the independent directors on the Tata Sons board were duty bound to protect the interests of minority shareholders, the notice stated.
The Tata group and SP group are involved in a bitter legal battle after Mistry was sacked as the chairman of Tata Sons in 2016.

The Supreme Court had in May sought response from the Tata group and its patriarch Ratan Tata on the cross-appeal by the Mistry-run family firms seeking proportionate representation for the SP Group on the Tata Sons’ board.

Earlier, the top court on January 10 had stayed in entirety the NCLAT’s December 18 order that reinstated Cyrus Mistry as chairman of Tata Sons after calling his removal in October 2016 as “illegal”. The appellate tribunal while terming Tata Group’s actions against Mistry as “prejudicial” and “oppressive” had also said Tata Sons’ move to turn into a private company from a public limited as unlawful, and had ordered its reversal.

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