Tata Sons withheld info on its public deposits: Mistry2 min read . Updated: 14 Jul 2020, 05:51 AM IST
- Cyrus Investments, a Mistry firm, alleges Tata Sons accepted public deposits till ’02
- During operation of the 1956 Act itself, Tata Sons accepted public deposits, Mistry firm alleges
MUMBAI : Former Tata Sons chairman Cyrus Mistry has accused Tata Sons and its board of directors of withholding “material information" from courts and shareholders about Tata Sons’ controversial move to change into a private company after he was sacked in 2016.
Cyrus Investments, one of the shareholders in Tata Sons, alleged that Tata Sons accepted public deposits till 2002 in accordance with the public company status it now seeks to change, ostensibly to deny representation to Mistry firms.
Tata Sons assumed the character of a public company and not merely a “deemed" public company since it never acted in accordance with restrictions imposed on private companies in collecting deposits from the public, the Mistry firm said in its latest submission before the Supreme Court.
“This is a material fact suppressed by Tata Sons and its majority shareholders from the RoC and indeed the NCLT and NCLAT that, during the operation of the 1956 Act itself, Tata Sons widely accepted public deposits. Therefore, Tata Sons was de facto and de jure a public limited company," it said.
A private company could not invite or accept public deposits, according to the law prevailing in December 2000.
Moreover, according to the Reserve Bank of India guidelines, a private company accepting public deposit is automatically defined as a public company, the Mistry firm said.
Cyrus Investments further alleged that Tata Sons and its board of directors withheld the material fact from shareholders in resolution of the proposed conversion, the NCLT, and RoC that it had collected deposits and made filings with the RoC under Rule 10 of the Companies (Acceptance of Deposit), Rules 1975 that it was a public company.
“On the sheer falsity of these assertions, this Honble Court ought not only to declare the purported conversion to be illegal but also censure the board of Tata Sons for its conduct," Cyrus Investments said.
A Tata Sons official, however, said taking public deposits was not a violation of Companies Act.
“A deemed public company is not an ordinary public limited company. A Supreme Court ruling of 2014 had clarified that deemed public companies converted before 2002 are hybrid companies and can retain the characteristics of private company. So accessing public funds was not in violation of company law or inconsistent with legal character of the company at the relevant time," he said, requesting anonymity.
Cyrus Mistry and his investments firms are fighting a court battle against Tata Sons over the former’s ouster from the Tata group. The Mistry firms are seeking proportional board representation as the largest non-Tata shareholder in Tata Sons.
The conversion of Tata Sons from a public company to a private one in August 2018 is one of the major points of contention in the three-and-a-half-year legal tussle. Tata Sons had received shareholder approval for the move in September 2017.
Mistry firms had opposed this move because, by going private, Tata Sons had ensured that the Mistry firms do not exit by selling their shares to a rival of the Tatas. The move also rendered their holding illiquid.
Ratan Tata, chairman emeritus of Tata Sons Ltd, last week accused Mistry, a former protege, of misleading the Supreme Court.
Tata alleged that Mistry’s inherent aim is to get a foot in the door at Tata Sons, the group’s holding company, instead of the larger issues of corporate governance as is being projected by Mistry.
In an affidavit filed before the Supreme Court on 8 July, reviewed by Mint, the 82-year-old maintained that the demand for directorship by Mistry firms “is a calculated strategy orchestrated by Cyrus Mistry".