In a major win for Tata Sons in one of the most high profile cases, the Supreme Court on Friday, March 26, ruled that all the appeals filed by Tata Sons are valid and set aside the National Company Law Appellate Tribunal (NCLAT) order that had reinstated Cyrus Mistry as the executive chairman of the Tata Group.

The SC also put aside Shapoorji Pallonji’s claim of being an oppressed minority shareholder in the over $100 million salt-to-software Tata Group, terming Cyrus Mistry’s ouster as 'legal.'

In 2018, in a ruling by the company's law tribunal, NCLT, had restored Cyrus as the executive chairman of the Tata conglomerate after he was ousted in 2016, saying his dismissal was 'illegal’. The NCLAT order also found that Tata Group’s decision to convert from a public company to a private company was in a manner prejudicial and oppressive for the minority shareholders of the companies.

A three-judge bench comprising of Chief Justice of India SA Bobde, Justice AS Bopanna, and Justice V Ramasubramanian upheld the re­conversion of Tata Sons from a public company into a private company and rejected claims made by the Mistry family.

However, the apex court refused to get drawn into the issue of resolving the 18.4 per cent stake that the Shapoorji Pallonji Group (SP Group) holds in Tata Sons. It left the decision to both sides to resolve the matter and take legal recourse, if necessary, to decide the value of shares held by the Mistry family.

“The valuation of the shares of SP Group depends upon the value of the stake of Tata Sons in listed equities, unlisted equities, immovable assets, etc., and also perhaps the funds raised by SP Group on the security/pledge of these shares. Therefore at this stage and in this Court, we cannot adjudicate on the fair compensation. We will leave it to the parties to take the Article 75 route or any other legally available route in this regard,” the Supreme Court said in its judgment.

The War Of Shares

The charitable trusts of the Tata family control a 66 per cent stake and Mistry Family is the largest minority shareholder in Tata Sons.

The Supreme Court verdict is likely to ease tension between the two families, although the matter is not fully resolved yet. The actual value of stake of the Mistry family in the Tata Group could turn out to be the next bone of contention between the two groups.

At the same time, in the light of SP Group looking at a debt restructuring plan for almost about Rs 10,900 crore and has been facing financial stress for a while, SP group’s 18.4 per cent shares in Tata Group holds much importance.

The Mistry family had shown interest in exiting the group by selling their shareholding and submitted a plan in the Supreme Court. However, both sides differed on the valuation of the shares. The SP group believed that their shares were worth Rs 1.75 lakh, whereas Tatas rejected their claim saying that the valuation of SP’s group shares in the company is between Rs 70,000-80,000 crore only.

Now with the Supreme Court ruling in the favour of Tata Group, the next battle between both the sides will be on the value of Mistry family’s stake in Tata Group, and it will be interesting to see whether the two parties can find a middle path.

As case dragged for almost four years, it also became India’s worst publicly fought corporate battle. However, the relationship between the two families turned soured in last four years. Before that, the two groups shared a century-old bond.

The Century-Old Bond

If and when SP group exits the Tata Sons in the future, the pain of a public feud between two of India’s most influential Parsi families will cast a shadow in the business community because of their century-old association.

There two groups first got in touch in the early 1920s through FE Dinshaw, a prominent businessman and lawyer at that time. Dinshaw was a close friend of JRD Tata and lent huge sums of money to the Tata Group during the ’20s, which over the years, were converted into equity.

Dinshaw introduced construction magnate to the Tata group and their association immediately took off after SP group bagged the order to built Tata Group’s headquarter - iconic ‘Bombay House’.

The relationship between the two families deepened in the following decades with SP group becoming a major vendor partner of the Tata Group. When Dinshaw died in 1936, his heirs sold his 12.5 per cent stake in Tata Group to Shapoorji Pallonji Mistry, making indirect equity participation. Tata Sons, however, has disputed this claim and submitted a letter in NCLAT in 2018 that the Mistry family bought its stake in the Tata Group in 1965. The Supreme Court earlier also noted that 'the relationship (between the two parties) was not based purely on commercial considerations but factors outside of purely economic factors,' alluding to the personal relationship between two families.

The two families also happen to be linked by marriage, Ratan Tata's half-brother Noel Tata is married to Aloo Mistry, the daughter of Pallonji Mistry, and sister of Cyrus Mistry. In 1991, when Ratan Tata was nominated to become the chairman of the Tata Group, there was much resistance from the old guard to his nomination. However, Pallonji Mistry, a board member and Cyrus Mistry’s father, emerged as a prominent supporter and played an important role in Ratan Tata’s ascension to top post.

After spending almost 21 years at the helm, Ratan Tata had anointed Cyrus Mistry as chairman. But within a year, Ratan Tata started questing his decisions and saw Mistry’s action as an attack on his legacy.

In just four years, Ratan Tata fell out with him, blighting the relationship between the two families that was build over 100 years.