On the 5th of September, Tata Sons Ltd moved an urgent application against the Shapoorji Pallonji Group. The application was put up to the Supreme Court of India to restrain the group promoters from raising capital against the security of their shareholding in Tata Sons.
The Shapoorji Pallonji Group had signed definitive documents with a marquee global investor to raise ₹3,750 Crores. Thereafter, the Tata Sons Ltd appealed to the apex decision making institution of the country. This appeal was made just one day after the SP Group had signed the definitive documents.
About the Shapoorji Pallonji Group:
The Shapoorji Pallonji Group is also known as the SP Group is a business company from India with a vast range of interests, including construction, real estate, textiles, engineered goods, home appliances, shipping, publications, power, and biotechnology.
The company was found by Pallonji Mistry in 1965 and has its headquarters located in Mumbai. The company was also named Pallonji Mistry, until 2012, when he announced his retirement and the succession of his son, Shapoor Mistry.
They are often regarded as “one of India’s most valuable private enterprises”.
The US$2.5 billion Shapoorji Pallonji Group has two listed companies, Forbes & Company Ltd. and Gokak Textiles.
Tata’s application to the Supreme Court:
According to reports, in the application made by Tata Sons, they have sought to restrain the creation of any direct or indirect pledge on the Tata Sons shares. The company also took up position such that any pledge will amount to the transfer of shares. This will also allow, under the Articles of Association (AoA), the board of Tata Sons had a right of first refusal, to buy the shares of any member who is seeking to sell their shares at fair market value.
The Shapoorji Pallonji Group companies hold an 18.4% stake in Tata Sons. The SP Group has protested against the move by Tata Sons. In a statement, they put out that Tata Sons will inflict irreparable damage on the SP group. They also said that the two main sectors of the group, namely the construction and real estate sector, have been largely affected by the COVID-19 pandemic. They added that due to the harsh impact of the coronavirus pandemic on the company they are in need of funds right now.
The two groups of companies are tangled in legal battles since December of 2016. This prolonged legal battle was said to have commenced as Cyrus Mistry was sacked as the chairman of Tata Sons in October 2016. Thereafter the Shapoorji Pallonji Group had filed a company petition against the Tata group, through its Investissement firms. They accused the company of mismanagement and oppression of minority shareholders at Tata Sons. The matter has not yet have reached the final statement by the Supreme Court. It is presented with the Supreme Court for final adjudication.
A Shapoorji Pallonji Group spokesperson said to Mint, “The promoters of the SP Group are in the process of raising ₹11,000 crores from marquee global investors with ₹3,750 Cr being raised in the first tranche, against the security of shares that their investment companies own in Tata Sons. These funds are intended to mitigate the severe stress caused by the COVID-19 pandemic, deleverage the group’s balance sheet, support its financial obligations, and protect the livelihoods of its workforce. This vindictive move by Tata Sons is solely aimed to create delays and roadblocks in the Fundraise that will jeopardize the future of 60,000 employees and over 1 lakh migrant workers who draw sustenance by working at various SP Group facilities.”
The Shapoorji Pallonji Group is also asking the Supreme Court to dismiss the petition made against them by the Tata Sons. They are asking the apex court to dismiss the petition on the basis that ‘creation of pledge does not amount to transfer of shares’.
Justice Srikrishna, a former Judge of the Supreme Court, was reported by the Mint to have said in a statement issued by SP group, “The ability of Cyrus Investments and Sterling Investments to pledge their shares in Tata Sons in favor of the third party is not in any way controlled by the Articles of Tata Sons. This is so because the pledge of shares does not amount to a transfer of the title to the shares, as the title of the shares would continue with the pledgor.”