New Delhi, Dec 18 : Senior Advocate Shyam Divan, counsel for SP Group, explained the rationale behind the separation plan put forth by the SP Group while arguing before the Supreme Court.
The scheme proposed by the SP Group is analogous to a buyout of shares by the company through a reduction in capital, with the only difference being instead of full cash payment, the SP Group has given flexibility to Tata Sons to pay in cash and/or shares of TCS and other listed entities.
If the Tata Group do not want the SP Group to have interest in multiple Tata Group companies, they can compensate it with equivalent TCS shares.
Divan said on Thursday the original prayers in the proceedings were tailored to ensure that the governance standard at Tata Sons is maintained and the SP Group could continue to play a role which it had played for many decades to protect the interest of Tata Sons as an institution and its shareholders.
However, when the majority shareholder blocked the legitimate pursuit of financing and pledge of SP Group’s interest which has endangered its 65,000 employees and their families and over 1,00,000 migrant workers at the time of pandemic has made it clear that the differences are now irrecoverable, and it is near impossible for the two groups to co-exist.
Divan further said, it would be unfairly prejudicial to apply any discount to the SP Group’s holding as they never acquired Tata Sons shares at a discount. He further stated forcible squeeze out of SP Group by using article 75 of Tata Sons would also be unfairly prejudicial as this article allows the Board of Tata Sons, which is controlled by the majority shareholder to decide the value.
One of the leading lawyers on the condition of anonymity said “In the case of oppression and mismanagement falling under the section 241, 242 of the companies act there is a recent Supreme Court judgement which ruled, minority shareholder can be given exit through a reduction in capital. Also, there are numerous case laws and precedents which clearly indicate that the fair value of the minority shareholding should be a pro-rata value of the total business without a discount and the consideration can be paid in species instead of cash”.
During the course of argument Tatas have pegged the valuation of SP Group’s shareholding in Tata Sons at 80,000 crore.
One of the leading valuation experts on the condition of anonymity said “The valuation figures indicated by Tata Group looks quite absurd as the proportionate value of TCS shares for SP Group itself would be around Rs 1.40 lakh crore in the current market”.
In the recently concluded AGM of Tata Sons, Chairman N Chandrasekharan stated the value of Tata Brand currently stands at $ 20 billion. One of the contentious issues between the two warring groups would be the inclusion of the Brand in the valuation.
Sources closer to the matter have said, in the AGM of Tata Sons for year 2007, Pallonji Mistry, father of Cyrus Mistry, brought up this issue and it is minuted and agreed by Tata and the then board of Tata Sons that henceforth the ‘Brand Value’ will be incorporated into the value of the shares.
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