Tatas counter Cyrus Mistry's charges of 'oppression' of minority shareholders

Cyrus Pallonji Mistry | Former Chairman, Tata Group | Net worth: Rs 69,400 crore

Tatas today countered Cyrus Mistry's allegations, including oppression of minority shareholders, saying none of the charges were pressed by his counsel at the hearing and all claims look like "a complete afterthought".

Tata group counsel also said that Mistry or his group did not oppose the changes made to the articles of association of Tata Sons more than a decade ago.

"Cyrus Mistry himself was selected by a committee under article 118 and he himself is challenging that today. He is challenging the very article under which he was selected," Tata Sons counsel Abishek Manu Singhvi told the NCLT today.

Stating that issues raised by Mistry's counsel were without merit, Singhvi said article 86 (relating to general body quorum), article 104 B (promoters getting one-third nomination), article 115 (quorum for the board), article 121 (affirmative vote), and article 121A (relating to the notion that matters must be tabled before the board members) are not unique and that all the shareholders had agreed on these articles over 51 years ago when the Mistry group became the largest minority shareholder in the Tata Group.

The Tata counsel also dismissed Mistry's claim that his group suffered losses due to the mismanagement of Tata Group companies which took place after these arbitrary changes were made to the articles of association of Tata Sons.

Noting that the Mistry's Shapoorji Pallonji Group was a shareholder of Tata Sons since 1965, Singhvi said since then the value of their investments aggregating to Rs 69.57 crore has appreciated to Rs 58,441 crore as of March 2016 and between 1991 and 2016, the Mistry's took home dividends worth Rs 872 crore.

"Indubitably, the petitioners have greatly enjoyed the fruits of their investment in Tata Sons," he said adding all the allegations look like "a complete afterthought".

Stating that Mistry's allegation "of lack of corporate governance" is "bogey," he said in fact, the petitioners have voted in favour of the introduction of these articles in 2000.

Singhvi further told NCLT that there were no objections when these articles were amended by the board at a meeting held on September 13, 2000, wherein Ratan Tata as chairman of the board had proposed the amendments to these articles and which were passed unanimously.

Mistry's father Pallonji Mistry, who attended that board meeting, also did not object then. Even when in 2014 article 121A was freshly inserted there was no objection, Singhvi said.

"How can these articles be considered bad only on October 24, 2016", Singhvi wondered.

Terming Mistry group's counsel Aryama Sundaram's plea as "conditional, opportunistic and of no value," Singhvi said they are oral and not written complaints and how could he say that article 121 A is bad now.

All these matters which require board approval involve liabilities and debts for the companies and require a lot of scrutiny, Singhvi said.

The Mistry group had in November moved the NCLT Mumbai bench seeking to amend its petition demanding action against Tata Sons for "oppression" of minority shareholders and "mismanagement" of Tata Group companies.

Cyrus Investments and Sterling Investments filed the amendment pleas on November 3 and the National Company Law Appellate Tribunal (NCLAT) had in September allowed Mistry firms' plea seeking a waiver of the 10 per cent minimum shareholding eligibility criterion, to be able to move the tribunal against Tata Sons.

The Mistry family owns 18.4 per cent stake in Tata Sons, which owns the over USD 103-billion diversified Tata Group. But the holding is under 3 per cent if the preferential shares are excluded (a point the Tatas stressed), thus not meeting the criterion of having at least 10 per cent ownership in a company for filing a case of oppression of minority shareholders under the Companies Act.

Mistry is locked in a legal battle with the Tatas since his sacking as chairman of Tata Sons on October 24, 2016, and removal as a director on February 6, 2017.

The appellate tribunal had said although Mistry's companies did not meet the minimum shareholding norm, under exceptional circumstances, this statutory requirement can be waived.

It directed the NCLT, which had dismissed Mistry's petition against Tata Sons on the ground of not meeting the minimum shareholding criterion, to decide the case in three months.