Tata-Mistry case verdict: SC leaves issue of share valuation open, to be decided in separate legal proceedings

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Tata-Mistry case verdict: SC leaves issue of share valuation open, to be decided in separate legal proceedings


The Supreme Court on Friday set aside a NCLAT order which had restored ousted executive chairman Cyrus Mistry at the helm of affairs at Tata Sons, with observations to the effect that the Tribunal had overturned well-settled principles of law.

“All questions of law in favour of Tata Group,” a bench led by CJI S.A. Bobde said, dismissing pleas by Cyrus and Sterling Investments.

The bench said that the value of shares of Tata Sons depends on equity, but left the issue open for he two parties to reagitate and settle in separate legal proceedings.

The minority shareholder Shapoorji Pallonji group — including Cyrus and Sterling Investment — had accused the majority shareholders in Tata Sons of oppression and mismanagement.

The NCLT had ruled in favour of the Tatas, but in appeal the appellate tribunal, the NCLAT, on Dec 18, Dec 2019 ordered the reinstatement of Mistry as executive chairman. The top court subsequently stayed the order on appeals and cross appeals filed by both sides.

Mistry has since waived off his plea for reinstatement as the executive chairman. Instead, his Shapoorji Pallonji group had insisted that the court ensure that the interests of the minority shareholders are protected in Tata Sons.

It has suggested a swap of its 18.4 per cent stake in Tata Sons for an 18% share in all Tata companies. The Shapoorji Pallonji group has valued this 18.4 % share at Rs 1.75 lakh crore. Tata sons has rejected this settlement offer outright.

This offer was “nonsense” because the “relief sought as a matter of right” was akin to restructuring of the company, their lawyer Harish N. Salve had told the court.

“Cut to the chase. They are seeking to have the assets of Tata Sons divided so that they can get an 18% share in all Tata companies,” Salve argued.

The SP Group’s lawyer Shyam Divan said that they were only seeking transparency in functioning. The Tata trustees should not run board-operated companies, he argued. Mistry was ousted by the board as executive chairman in October 2016.

Four years later, the SP Group sought separation from the holding company of the Tata Group and said in October that it is ready to swap its 18.4% stake in Tata Sons, which it valued at over Rs 1.75 lakh crore, for shares in listed Tata companies.

“Such an application is terrible at this stage,” Salve argued.

He said the Tatas can buy the Mistry family’s stake at a fair value, but what they are asking for is winding up Tata Sons. They are also asking for a share of the Tata brand value, Salve said as he concluded his arguments against the NCLAT order.

The CJI reacted: “They are demanding compulsory acquisition.”



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