Tata vs Mistry case | Steep rise in valuation of SP Group's stake shows company not 'mismanaged', Tatas tell SC

The legal wrangle between Tata Sons and Mistry-family controlled Shapoorji Pallonji Group (SP Group) is continuing in the Supreme Court over the latter's stake in the Tata Group. Senior counsel Harish Salve, representing the Tata Group, on December 9 disputed the mismanagement allegations made by Cyrus Mistry, stating that the valuation of SP Group's stake in Tata Sons rose from Rs 1 lakh crore in 2017 to Rs 1.75 lakh crore in 2020.

Salve mentioned the SP Group's cross-appeal in which it claimed that its stake in Tata Sons is worth Rs 1.75 lakh crore. He argued that SP Group is seeking over 18 percent stake in all downstream Tata companies.

Tata, Mistry wrangle over valuation mismatch | SP Group's stake in Tata Sons worth only Rs 80,000 crore, Tatas tell SC

"In the cross-appeal they have filed, they have claimed a valuation of Rs 1.5 lakh crore. They have now asked that they be given 18 percent in all downstream Tata companies, and as per their latest application the valuation is Rs 1.75 lakh crore," Bar and Bench quoted Harish Salve telling the Supreme Court.

"So if we go by their claims, it is a strange management which has mismanaged the company but still taken its valuation from Rs 1 lakh crore in 2017 to Rs 1.75 lakh crore (in 2020)," he added.

During the December 8 hearing, Tata Group told the Supreme Court that Shapoorji Pallonji Group's 18.4 percent stake in Tata Sons is worth not more than Rs 80,000 crore.

The differences over the valuation could prove detrimental to the cash-strapped SP Group, which has been locked in a legal battle with the Tatas since Cyrus Mistry’s unceremonious removal as Tata Group chairman in 2016.

Apart from the valuation mismatch and mismanagement allegations, Salve even cited how Cyrus Mistry joined Tata Group in 2006 and was inducted as deputy executive chairman to work under Ratan Tata before he took over from Ratan Tata. The lawyer also stated that it was the first time someone outside Tata Trusts was taking over as chairperson of Tata Sons.

"Earlier a person from Tata Sons used to be appointed to boards of Tata companies. What Mistry did was to appoint his persons to those companies with the result that there was disconnect between Tata Sons and operating companies, the only link being Mistry," Salve said.

Arguing on the allegations of Mistry that there was mismanagement in the Tata Sons, Salve stated, "The valuation of their holding (SP Group in Tata Sons) rose from Rs 69 crore in 1965 to Rs 58,000 crore in 2016. Yet they say Ratan Tata ran the company so badly, that it was fit to wind it up in 2016."

He further added that when things are going well and companies are making money, Mistry is making allegations of mismanagement.

Among other details, Salve pointed out to CJI SA Bobde that Tata Sons have been a private company which limits transfer of shares and number of members to 50 and after the 2013 Act, by definition, they became a private company.

Earlier on October 29, 2020, Cyrus Mistry-led SP Group submitted a plan of separation to the Supreme Court, seeking to end its seven-decade-long association with the Tata Group. The SP Group had sought a non-cash settlement in form of shares in all listed Tata entities where Tata Sons owns a stake – basis pro-rata split of listed assets (per known share price value) and pro-rata split of the brand (as per valuation done and published by Tatas).

Apart from this, Mistry had also sought his reinstatement as the chairperson of the Tata Sons. Reports suggested that Tata Sons had offered to buy out SP Group's stake in its holding company to help the group raise money to pay its debt.