Don’t let Tata Sons become private firm: Mistry counsel

In his prayer on Wednesday to the bench here of the National Company Law Tribunal (NCLT), Cyrus Mistry( picture) family firms’ counsel Aryama Sundaram pleaded that Tata Sons be restrained from being converted into a private company.

And, that it be directed to abide by all requirements of the Companies Act that are applicable to the firm as a public company.

This was one among five prayers to the judge by Sundaram on the third and final day of argument on behalf of his petitioners. Tata’s counsel will present the respondent’s argument from Thursday.

Sundaram also appealed that Article 75 of Tata Sons’ articles of association, which gives powers to the Tata Trusts to get Mistry, former chairman of Tata Sons till removed from the charge, and his investment firms to transfer their entire shareholding be scrapped.

In a board meeting on September 21, Tata Sons’ shareholders voted in favour of the holding company changing its legal status from public to private, overruling objections from the Mistry family.

In a letter to the board of Tata Sons, Cyrus Investments Pvt Ltd, an entity of the Mistry family, has objected to the proposal. Terming it “yet another weapon” to oppress minority shareholders.

The move could be detrimental for Mistry’s family. For one, as a private limited entity, Tata Sons would not need to make as many disclosures as it has made till now. Second, if it defaults in paying dividend for two or more years, its preference shareholders would get voting rights, with chairman emeritus Ratan Tata getting a bigger say. As on December 2016, Ratan Tata is the largest shareholder of preference shares (holding of35.6 per cent). He is also the biggest individual holder of equity and preference shares together (holding of 31.43 per cent). Tata Trusts and Tata Group companies hold nearly 79 per cent equity stake in Tata Sons; individual investors, including the Tata family, have the rest of the equity.

Mistry’s counsel also pleaded that the Mistry family, single largest class of minority shareholders in Tata Sons, be entitled to proportionate representation on the company’s board and its committees, and the articles of association be amended accordingly.

Sundaram also appealed that Article 121 be amended so as to obviate the necessity of an affirmative vote of the majority directors nominated by the majority shareholder trusts. The current provision allows Tata Trust to nominate two-third of directors on the board.

Mistry family’s counsel requested that Tata Sons be directed to ensure any decisions with regard to matters before the Board of the general body of Tata Group companies (as defined in Article 121A) be communicated only by the chairman or other authorised representative of Tata Sons, and only after approval of the board of directors.