Tatas reject Mistry Group's quasi-partnership claim | Economic Times

MUMBAI: Tata Sons, in its response to the Supreme Court petition filed by Cyrus Investments, a firm controlled by the Cyrus Mistry family, has rejected the latter’s contention that it is a quasi-partnership. The Tata Sons affidavit also rejected the claim that members of the Mistry group are entitled to proportionate representation on the board of Tata Group’s holding company.“The AoA (articles of association) of Tata Sons do not postulate any appointment of directors by proportionate representation. Seeking creation of such rights by amending the AoA of Tata Sons would amount to rewriting the articles of association which is completely impermissible and contrary to law,” Tata Sons said. If the Mistry group were now allowed to nominate directors to the Tata Sons board, the consequences would be dire, as per the response. “...If the appellants are allocated a seat or granted proportionate representation in the BoD (board of directors) and its committees as sought, it would disrupt the existing cohesive functioning of the BoD and have a detrimental effect on the affairs of Tata Sons and all its stakeholders,” said the holding company.‘No Legal Basis’“Not only is there a complete absence of statutory/legal basis for claiming such relief (proportionate representation) but further there exists no facts/circumstances which warrant such direction to be issued...," said the company. 76884502‘Reliefs sought from SC different from original claims’Further, Tata Sons has asked the Supreme Court to set aside the National Company Law Appellate Tribunal (NCLAT) ruling and has argued that the reliefs sought by the Mistry camp in the apex court — notably the claim that Tata Sons is a quasi-partnership — were never sought when the original case was filed by them in the National Company Law Tribunal (NCLT). The NCLAT had reinstated Cyrus Mistry as chairman of Tata Sons in December 18, 2019, setting aside his dismissal from that position in November 2016.Tata Sons has claimed that the NCLAT ruling is "fraught with a serious error of law" and based on "complete misunderstanding and misreading of the underlying facts". According to Tata Sons, "growing more and more wary of their own case, the thrust of appellant’s focus has now shifted to propagating to quasi-partnership theory to secure the relief of proportionate representation" on the board."Before NCLT, the thrust of the appellant’s case was mismanagement at Tata Sons," the company argued, further adding that "several reliefs such as seeking a forensic investigation into the affairs of Air Asia, a transaction with Mehli Mistry and C Sivasankaran were sought to bring so-called oppression and mismanagement." However, such reliefs were not pressed before NCLAT and have been now abandoned completely in the Supreme Court."It was not until the matter reached the NCLAT, which is when for the first time the appellants (Cyrus Investments) conjured this plea of quasi-partnership in their company appeal," said Tata Sons in its response.'Tata Sons not a partnership'Countering the arguments of the Mistry camp of Tata Sons being a partnership firm, the group has said that Tata Sons was incorporated in 1917 and after five decades , the appellant in 1965 acquired 40 ordinary equity shares and 48 preference shares to become member/shareholder of Tata Sons. In the same year, PS Mistry had also acquired 84 ordinary shares of the company in his individual capacity. "Pallonji Mistry or Cyrus Mistry did not serve on any board as nominees of the SP Group or because of their purported relations as partners with Tata group," it stated."There exists no formal or informal agreement/pact between the appellants (Cyrus Investments) and so-called Tata Group/Trusts of regulating their inter se relationship in respect of the conduct of the business, management and affairs of Tata Sons," argued the company in its 162-page response. "...there is no evidence to show that the appointment of Pallonji Mistry was pursuant to any arrangement/ agreement between the shareholders to this effect."Pallonji Mistry during his tenure on the board from 1980 to 2004, and Cyrus Mistry as director from 2006 to 2012 did not occupy any executive position. This position was changed after Cyrus was appointed as deputy chairman, 50 years after SP group became a member of Tata Sons. "Not because of some entrenched rights or capacity as a nominee or representative of SP group, a right which was not conferred on them even when Tata Trusts has conferred the right to nominate one-third of the board with the insertion of Article 104B in 2000," it said.Tata Sons was never a public company and the certificate of incorporation revised by RoC in August 2018 by recording status of Tata Sons as a private company recognises its pre-existing reality. Rejecting Mistry's contention that the conversion was done to circumvent the requirement of appointing independent directors, the response states that Tata Sons voluntarily introduced Article 104 A in its amended articles of association that requires that one-third of its board should be independent directors.Tatas have also said that the veto power conferred under Article 121 has never till date been exercised by Trust-nominated directors. "The existence of an affirmative vote does not imply that the Trust-nominated directors can pass any resolution at will. The majority shareholders of Tata Trust are not involved in the day-to-day functioning of Tata Sons. Tata Trust-nominated directors to hold non-executive positions and hence to protect the interest of Tata Trust as a majority shareholder, the affirmative voting rights in Article 121 were incorporated in the AoA of Tata Sons," it said. The veto power enables Tata Trusts, the majority owner of Tata Sons, to exercise over the latter.