Mumbai: The National Company Law Tribunal (NCLT) in its recent ruling has asked the operating companies of Tata Group to run as per the wishes of majority shareholders, Tata Trusts. Notably, more than two-thirds stake of the holding company Tata Sons are been held by Tata Trusts.
Amendment in Articles of Association
There were no apprehensions over the rights of majority shareholders being compromised while Ratan Tata was the Executive Chairman of Tata Sons. He was also the Chairman of Tata Trusts at that time. The Articles of Association article was amended by Tata Sons under the leadership of Cyrus Mistry, who was the Chairman of Tata Sons, to protect the rights of the majority. This was done when the post of Executive Chairman went into the hands of the person who did not belong to the Trusts.
Ratan Tata said in December 2012 that it would be better if Trusts and the Tata Sons enter into an agreement so as to clarify the involvement of Trusts in strategic plans, annual plans and disinvestment of shareholdings because in future the Chairman of the Tata Trusts and Tata Sons might be a different individual.
Following subsequent discussions between Ratan Tata and Cyrus Mistry to implement the arrangement, the Articles of Association were amended with unanimous approval in April 2014.
Cyrus Mistry Misunderstood the Role
As per the ruling, Cyrus Mistry, while being the Chairman of Tata Sons, thought that he would be free to operate the company and exercise powers in the same manner as Ratan Tata was doing but he forgot that Ratan Tata was serving as Chairman of Tata Trusts as well as Tata Sons.
In 1965, the SP Group bought shares from Dinshaw Group and became the shareholders in the company.
The SP Group remained on board between 1980-2004 and 2006-2016 without even having any position mentioned for them in the Articles of Association. Mistry group differed with the Trusts in every single board meeting.
No Special Right to SP Group
There is no special right given to the SP Group, which holds 18 per cent shares and is a minority investor, in the Articles of Association. They are investors and as equity shareholders have earned more than Rs 800 crore as dividends till date and they are not the founder members too.
It has been mentioned in the petition filed by the company that SP Group is the single largest individual group next to Tata Trusts, partners of the company though projecting themselves as minority shareholders having a stake valued at Rs 1,00,000 crore. Philanthropic trusts led by Sir Dorabji Tata Trusts and Sir Ratan Tata Trust own two-thirds of Tata Sons, which was established in 1868 as a trading enterprise.
