The National Company Law Appellate Tribunal didn’t give any basis for arriving at the conclusion that Tata Sons Pvt.—the holding firm of the Tata Group—was a fit case for winding up, Senior Advocate Harish Salve told the Supreme Court on Tuesday.

Salve, who was representing Tata Sons, told a three-judge bench comprising Chief Justice of India SA Bobde, Justice AS Bopanna and Justice V Ramasubramanian that reasons such as losses cannot be the basis for arriving at such a conclusion unless they were enormous and there was a lack of probity that justified removing the majority shareholders, which in this case is the two Tata Trusts that hold 68% stake in the holding company.

He said that in its earlier appeal, the Shapoorji Pallonji Group—which is the second-biggest shareholder in Tata Sons—pegged the value of its stake at Rs 1.5 lakh crore, and in another application a few months later it increased it to Rs 1.75 lakh crore.

The Mistry side, in its settlement offer, has claimed the value of their shares in Tata Sons to be at Rs 1.75 lakh crore which has been contested by the Tatas who yesterday told court that the value of the Mistry side’s shares stands at somewhere around Rs 70,000-80,000 crore.

In September, the Mistry family announced its intention to seek a separation of interest from Tata Sons. The decision came after four years of litigation, with a recent Supreme Court ruling barring the SP Group from pledging or selling any of Tata Sons’ shares.

On Oct. 29, the Mistry side submitted an affidavit in the top court in which it suggested a share swap arrangement in listed entities of Tata Group in lieu of shares held by them in the unlisted Tata Sons.

The plan of separation proposed by the SP Group included:

  • A selective reduction of capital at Tata Sons thereby extinguishing shares held by them.
  • In exchange, the SP Group be granted shares in listed companies of the group.
  • Also, cash consideration or shares for brand value, unlisted assets, etc.

In case the Tata Group does’t want to part with stocks in a particular listed entity, say for maintaining a certain shareholding level, according to the separation proposal, SP Group was willing to accept shares of Tata Consultancy Services Ltd. or cash.

“The net asset value of 18.37% stake of the SP Group in Tata Sons is estimated at more than Rs 1,75,000 crore,” the SP Group said. “Disputes over valuation can be eliminated by doing a pro-rata split of listed assets (share price value is known) and pro-rata share of the brand (brand valuation is already done by Tata Group and published). A neutral third-party valuation can be done for the unlisted assets adjusted for net debt (that is, debt less cash).”

The dispute between the Tata Group and the Mistry family stemmed from the sudden ouster of Cyrus Mistry as chairman of Tata Sons in October 2016. Soon after, Mistry and firms controlled by the Mistry family approached the National Company Law Tribunal in Mumbai with a suit of oppression and mismanagement against Tata Sons. While the NCLT ruled in favour of the Tatas, the order was reversed by the National Company Law Appellate Tribunal.

Tata Sons challenged the NCLAT ruling in the Supreme Court, where the case is pending.

Apart from Senior Advocate Harish Salve, both sides will be represented by a battery of senior lawyers. Senior Advocate Abhishek Manu Singhvi, Mohan Parasaran would represent the Tatas whereas the Mistry side will be represented by Senior Advocates CA Sundaram, Janak Dwarkadas and Shyam Divan.

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