Tata Sons, owned 66 per cent by Tata Trusts and 18.5 per cent by the Mistrys, is a two-group company and is a quasi-partnership between the two groups, said the Mistry family.
To apply quasi-partnership principles to Tata Sons, Shapoorji Pallonji (SP) Group had said there were ‘two groups’ in the company — Tata Group and non-Tata Group/ SP Group. But, Tatas have said this distinction is itself flawed and the starting premise of their case is wrong. According to the Tatas, Tata Sons neither is a family company nor a ‘two-group’ company. The majority of Tata Sons stake is held not by any family or corporate promoter group but by seven ‘public charitable trusts’, which cumulatively hold close to 66 per cent of the equity stake while another 12.87 per cent of the stake is held by different companies, including the listed Tata entities.
However, sources close to Mistry family have said the concept of quasi-partnership is different from the concept of partnership. “Quasi-partnership is a relationship of personal character and good faith among the shareholders of a company, which is analogous to partners in a partnership. Quasi-partnership does not limit the relationship to documented written agreements but recognises action, conduct, mutual trust and confidence,” the Mistry camp said, while reacting to Tatas’ filings in the Supreme Court.
The Mistrys claimed that various letters and transactions between the two clearly showed how the relationship between two partners were based on mutual trust, confidence and personal relationship that went beyond the equity investment in Tata Sons.
The letters written by Ratan Tata, the patriarch of the group, were shown at the National Company Law Appellate Tribunal (NCLAT) while arguing the case. “So, the claim from the Tatas that these were brought for the first time in the Supreme Court is incorrect,” it said in a statement.
Even at the National Company Law Tribunal’s Mumbai Bench, while pleading the case, the Mistrys had highlighted that how the relationship was based on understanding, trust and confidence. This was argued at length at the NCLAT. “It is far from truth that the Mistry side is highlighting this for the first time in Supreme Court,” it said. The plain reading of shareholding pattern clearly shows that Tata Sons is two-group company.
On the representation of the Mistry family on Tata Sons board, the Tata Group has claimed this will require amendment of the articles of association (AoA) of Tata Sons, which would amount to rewriting off the AoA that is completely impermissible and contrary to the law.
On this, the Mistrys said the NCLAT was the last forum to decide on the facts of this case and the NCLAT has already found that there are acts of oppression and mismanagement of minority shareholders. Contrary to the claims of the Tatas, the powers conferred on the judiciary under Section 242 of the Companies Act are very wide, including the power to amend the articles of the company to put an end to such acts and to ensure that such acts are not repeated in the future. “Under this, the claim of proportionate representation is not at all contrary to the law. Judiciary has the powers to grant board seat under Section 242 of the Companies Act,” it said.
Sources close to Mistry said they had also highlighted the conflicts of interest, ethical failures and governance breaches to the Supreme Court by the majority shareholder at Tata Sons.
Tata group claimed that Tata Sons was never a public company. “The claim that Tata Sons was never a public company is totally incorrect,” the statement from the Mistry camp said.