Not a two-group company, have no ‘quasi-partnership’ with Cyrus Investments: Tata Sons to SC
The apex court had on January 10 granted relief to Tata group by staying the NCLAT order of December 18 last year
New Delhi: Tata Sons Pvt Ltd has told the Supreme Court that it is not a ‘two-group company’ and there is no ‘quasi-partnership’ between it and Cyrus Investments Pvt Ltd.
Tata Sons Pvt Ltd (TSPL) said this in an affidavit filed in the apex court while responding to the cross-appeal filed by Cyrus Investments Pvt Ltd seeking removal of alleged anomalies in NCLAT order for getting representation on the TSPL’s board in proportion to the stake held by his family.
“All the foregoing facts (mentioned in the affidavit) are clear signs of the fact that Tata Sons was never intended to be and is not a ‘two-group company’ and there is certainly no quasi-partnership between the appellants (Cyrus Investments and another firm) and the so called ‘Tata Group’,” said the affidavit.
The apex court had on January 10 granted relief to Tata group by staying the National Company Law Appellate Tribunal (NCLAT) order of December 18 last year, by which Cyrus Mistry was restored as the executive chairman of the salt-to-software conglomerate.
A bench headed by Chief Justice S A Bobde had on May 29 issued notice to TSPL and others on a cross-appeal filed by Cyrus Investments Pvt Ltd.
Cyrus Mistry had also filed an affidavit to the apex court saying the Tata Group had an adjusted net loss of Rs 13,000 crore in 2019 — the worst losses in three decades.
In his reply to the Tatas’ petition challenging his reinstatement by the NCLAT last December, Mistry also demands that group chairman emeritus Ratan Tata should reimburse all the expenses to Tata Sons since his departure in December 2012 in keeping with best global governance standards.
“The Tatas had sought to exclude the dividends from TCS to arrive at operating profit in a bid to discredit my performance. Applying the same yardstick, the adjusted profit after tax (excluding profit from TCS) stood at a negative Rs 13,000 crore in 2019 for the Tata Group, which is the worst loss in three decades,” Mistry has said in his reply in the top court.
Mistry, the ousted chairman of Tata Sons, is seeking representation in the company in proportion to the 18.37 per cent stake held by his family, the cross-appeal has said.
In its affidavit filed in the top court, Tata Sons has alleged that the thrust of that Cyrus Investments Pvt Ltd’s focus “has now shifted to propagating the quasi-partnership theory to secure the relief of ‘proportionate representation’.”
“This is ironical since the issue of quasi-partnership was never pleaded before the NCLT,” it said, adding, “It is not until the matter reached the NCLAT, which is when for the first time the appellants conjured this plea of quasi-partnership in their company appeal.”
“Even though the NCLAT did not hold Tata Sons to be a quasi-partnership, at least not in so many words, it nevertheless proceeded to grant certain reliefs to the appellants on the basis of specious and misconceived reasoning that Tata Sons was a two-group company,” it said.
It alleged that the NCLAT order is “fraught with serious errors of law and based on a complete misunderstanding and misreading of the underlying facts” and is liable to be set aside in “totality as being unjust and legally indefensible.”
The affidavit further said that Tata Sons’ classification as a “‘two-group company’, consisting of the appellants on the one hand, and the Tata Group on the other, is a complete mischaracterization of the membership of Tata Sons.”
It said there has never been a “relationship of partnership” between Cyrus Investments and the so called ‘Tata Group’.
“In the present case, the AoA (Articles of Association ) of Tata Sons do not postulate any appointment of directors by ‘proportionate representation’,” it said.
“Hence, the first relief relating to proportionate representation sought by the appellants in the appeal merits to be rejected. Not only is there a complete absence of statutory/legal basis for claiming such relief, but further, there exists no facts/circumstances which warrant such direction to be issued in the present facts,” it said.
In the petition, the appellant has described the group’s relationship with Tatas as “a quasi-partnership relationship of a vintage of over 60 years, holding 18.37 per cent in the equity share capital of Tata Sons and whose stake is now worth over Rs 1.5 lakh crore”.
According to the petition, the Mistry group firm has sought remedies for many anomalies in the NCLAT order, including about not looking at alleged oppression of minority shareholders as well as converting Tata Sons into a private limited company as a post-facto move.
As per the petition, the tribunal order clearly and unequivocally found the prejudicial conduct by Tata Sons, but failed to provide certain important reliefs that would have put an end to the oppressive conduct of the majority shareholder.
Reinstating Mistry as the chairman, NCLAT had also termed the action of the Registrar of Companies to allow conversion of Tata Sons into a private limited company illegal.
Mistry had succeeded Ratan Tata as chairman of Tata Sons in 2012 but was ousted four years later.
While taking note of appeal of Tata group on January 10, the apex court had stayed the NCLAT order restoring Mistry as executive chairman of the Tata Group, observing that there were “lacunae” in the orders passed by the tribunal.