New Delhi, Jan 10 | The Tata Sons’ lawyers told the Supreme Court on Friday it will not invoke the power of compulsory purchase under Article 75, of the company’s Articles of Association, with regards to the shares owned by the Shapoorji Pallonji Group.
Senior advocate and former Solicitor General Mohan Parasaran, representing the Tata Sons, said prima facie, the NCLAT order was totally erroneous, and therefore a stay on the order was required.
Counsels for ousted Chairman Cyrus Mistry said they hold hold 18.5 per cent shares, but have been kept completely in the dark from “what is happening”.
As they cited that Mistry has been a member of the Board but have been sidelined completely, and therefore it is appropriate to maintain the status quo instead of a stay on the NCLAT judgement, the bench headed by Chief Justice S.A. Bobde and comprising Justices B.R. Gavai and Surya Kant said: “We will protect you.”
Tata Sons’ counsel gave its assurance to the court that it will not invoke the power of compulsory purchase under Article 75 in connection with the shares owned by the Shapoorji Pallonji Group. This statement was recorded by the court.
The exercise of Article 75 would empower Tata Sons to purchase the shares of any shareholder at a price valued as fair market price.
The NCLAT in December 2019 restored Mistry as Executive Chairman of Tata Sons and ruled the appointment of N. Chandrasekaran as illegal. Mistry has ruled out his return as the Chairman of Tata Sons, but instead asked for a seat on the Board, expressing apprehensions that Tata Sons should not invoke powers conferred under Article 75, which may eventually compel Pallonji Group to sell its stake.
The NCLAT judgement had derided the role played by Tata Trusts, the overwhelming majority shareholders with 66 percent in Tata Sons. The tribunal blamed its nominated directors from having an affirmative right over majority decision making by exercising the powers conferred under Article 75 under which, without any notice or reason, it can even take over their shares.
The tribunal judgement highlighted the potential abuse of Article 75 in the Articles of Association of Tata Sons in view of the manner in which the affairs of the company were being conducted as an intrinsically two group company with involvement of both groups working towards a joint effort of mutual benefit to both.
Article 75, which was part of AoA, was never viewed by the minority shareholders – in this case, the SP Group, as a possible tool of oppression. In fact, Article 121 was also not viewed in the same manner, but the events which unfolded on October 24, 2016 and subsequently thereof created more than a reasonable apprehension that Article 75 could be sought to use to marginalise and eliminate the minority shareholders from the company.
This is viewed as draconian by the NCLAT for it found that this apprehension was not misplaced or unfounded for it clearly indicated that minority shareholders were unhappy with the affairs of the company and wanted to sell their shares. The judgement goes onto say: “Article 75 stands coupled with the propensity for misuse would be wholly oppressive to the interests of the minority and would therefore need to be deleted.”