The SP group will press for not enforcing the squeeze out clause or article 75, which gives Tata Sons the first right of refusal, among other things
Since 22 September, when Shapoorji Pallonji group stated its intent to separate from Tata group, a lot has been said on how SP group will sell its 18.4% stake in Tata Sons Ltd. Today when the Supreme Court hears the Tata-Mistry case, on the grounds of oppression of minority investors, some clarity is likely to emerge. Here are the key issues that are likely to be discussed in the top court:
On 29 October, the two investment firms—Mistry Investment and Sterling Investment—filed a separation plea in the Supreme Court as part of additional relief in its minority oppression case. The SP group has said that the basic obligation of protecting the rights of the largest non-Tata shareholder has been broken. The SP group further stated that Tata group would go to any length to prejudice the rights of SP group and its interests would not be protected. SP group will press for apex court granting relief on its minority oppression and pressing for an exit from Tata Sons.
Tata group company shares in lieu of Tata Sons shares
SP group’s proposal for selling its Rs1.5 trillion stake in Tata Sons involves a share swap. Instead of Tata group shelling out this large sum in one go, the SP group suggested that it should be given shares of Tata group’s listed companies. SP group is bucketing Tata Sons in three—listed companies, unlisted companies and brand value. For unlisted companies, SP group is seeking independent valuation, payable in cash and/or in listed securities and for brand value payable by cash or listed securities. The apex court will likely take this on record and check with Tata Sons on their agreeability. SP group’s arguments in favour of this proposal include—won’t saddle Tata Sons with additional debt, easier and quicker to implement, disagreement over valuation will be minimized and provide liquidity to Tata group companies.
Tata group’s objections
Tata team of lawyers is set to argue on the "main oppression petition". While the SP group’s separation plea reduces chances of further debt on Tata Sons’ books, the Tata group has reservations. The Tata group’s issues include—this would give the warring SP group more say in the listed companies by virtue of their shareholding, valuation of SP group’s 18.4% shareholding in Tata Sons needs to be adjusted for net debt, disagreement over two-group theory. The SP group in its separation plea again put forward its argument that Tata Sons is a two-group company, which Tata group is vehemently opposing. Tata group is likely to say that SP group is just a shareholder (though largest non-Tata shareholder).
The SP group will press for not enforcing the squeeze out clause or article 75, which gives Tata Sons the first right of refusal. Under the said article, Tata Sons can force transfer of shares. SP group has argued that permitting the squeeze out would "be a reward to the oppressor and oppression of oppressed". Tata Sons on the other hand will argue on the legal validity of the section.
SC will play mediator
The apex court in such cases does not interfere in issues such as valuation or order a specific form of separation. It may ask the two groups to settle the issues and order for appointment of mediator and independent valuers. The lower court, National Company Law Appellate Tribunal (NCLAT), had suggested the same, when the matter was being heard before it.
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