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Pallonji Mistry.
Pallonji Mistry.

SP Group demands damages from Tata

Shapoorji Pallonji Group asks whether Tata Sons’ board members were involved in the decision to block the group’s fundraising efforts to meet its payment obligations

Shapoorji Pallonji (SP) Group has slapped a notice on Tata Sons Ltd’s board, seeking unspecified damages for blocking the group’s plan to raise funds by pledging its shares in the Tata group holding company.

In the notice, the SP Group has asked whether Tata Sons’ board members were involved in the decision to block the group’s fundraising efforts to meet its payment obligations amid “extreme illiquidity conditions".

The notice, a copy of which was reviewed by Mint, termed Tata Sons’ move as oppressive and sought an explanation within three days on whether the steps were taken in concurrence with the board, failing which the SP Group would seek appropriate legal remedies, including a claim for damages for the harm inflicted on the group, a spokesperson for the SP Group said.

The SP Group further said that Tata Sons has created panic among its lenders and financial institutions and caused damage to the group.

A Tata Sons spokesperson declined to comment.

The notice was sent a day after SP Group missed a deadline to repay its dues to group company Sterling and Wilson Solar Ltd. The promoters of the SP Group, led by construction tycoon Pallonji Mistry, paid only 103 crore of the 1,000 crore it owed to the company by the end of this month.

Tata Sons moved an ‘urgent’ application before the Supreme Court on 5 September to restrain the SP Group from raising capital by pledging its shares in Tata Sons. Tata Sons argued that any pledge will amount to transfer of shares and under the Tata Sons’ articles of association (AoA); the board has the first right to buy the shares at fair market value.

SP Group through its two investment firms—Cyrus Investments and Sterling Investments—owns 18.4% in Tata Sons. The stake is valued at as much as 1.5 trillion.

According to the Tata Sons application, Cyrus Investments has pledged its entire 9.19% stake in Tata Sons. Out of this, 7.5% has been pledged with Axis Trustee for 825 crore in January and February this year. In April, the charge was modified to secure a loan of 3,958 crore. An additional 1.83% was pledged with IDBI Trusteeship for securing a loan amount of 1,117 crore.

Tata Sons, in its application in the court, said that these shares have a market value of 75,000 crore. There were clauses incorporated in the pledge document to give comfort to the lenders that the pledged shares of the private company would be transferable in the event of a default.

The Mistry family filed a counter application on 7 September stating that this move was solely intended to inflict irreparable harm on the SP Group.

“The mala fide motive of Tatas’ move was further evident by the fact that Tatas kept their application on hold, purportedly for curing defects, despite moving a plea for urgency before SC," the SP group spokesperson said.

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