Tata, Mistry spar over pledging of shares

MUMBAI: Tata Sons Ltd will challenge the Shapoorji Pallonji Group’s plan to raise funds by pledging shares in the Tata group holding company, a person aware of the matter said, sparking a new flashpoint in their simmering corporate rivalry.

Article 75 of Tata Sons’ Articles of Association says the privately held company has the first right to buy if any shareholder decides to sell shares. The article also empowers it to direct its shareholders to sell their holdings by passing a special resolution.

“It is clear that Tata Sons wants to be a closely held company; so if at any given time, pledged shares are invoked and a bank takes ownership of those shares or shares are sold to another third party, then the entire purpose of restricting transfer of shares is defeated,” the person said on condition of anonymity.

The construction and real estate focused Shapoorji Group, headed by Pallonji Mistry, needs to raise funds to tide over its liquidity issues.

However, according to a second person aware of the matter, the Shapoorji group believes that the article does not restrict pledging of shares, but only transfer of shares to undesirable entities. Spokespeople for both Tata Sons and Shapoorji Pallonji declined to comment.

Mistry group companies had termed Article 75 as draconian and confiscatory in nature during their court battle. The National Company Law Appellate Tribunal in its judgement on December 13 did not strike down the section, but directed the Tata group to not exercise the section oppressively.

The latest disagreement adds to the protracted corporate battle ever since Cyrus Mistry was ousted as Tata Group chairman in 2016. He had been named the sixth chairman of Tata Sons, taking over the post in 2012.