The Supreme Court on Thursday agreed to hear a plea by Cyrus Mistry seeking proportionate representation on the Tata Sons Board for the Pallonji Group, which as per the plea has proved to be a “Guardian of the Tata Group for over six decades”.

Cyrus Mistry has argued that the Pallonji Group is the single largest, non-Tata shareholder with over 18.37% equity in Tata Sons and should receive proportionate representation on the board.

The SC has tagged this appeal with the appeal by Tata Sons challenging the NCLAT verdict. Earlier, in January, the SC had stayed the NCLAT judgment that had held that Cyrus Mistry had been illegally ousted as Tata Sons Chairperson.

In December 2019, ruling by NCLAT had held Tata Sons’ affair were carried out in a manner prejudicial and oppressive to the Pallonji Group. The NCLAT had directed for reinstatement of Cyrus Mistry as Tata Sons’ Chairperson. The NCLAT had also restored him as Director of three group companies. The NCLAT also held the conversion of Tata Sons from a public to a private company to be illegal.

However, the NCLAT had refused to amend or strike down the Articles of Association which had allegedly been “misused” to undermine the Pallonji Group. The NCLAT had reasoned that it lacked the jurisdiction to strike down Articles of Association.

The latest move by the Cyrus Mistry camp comes as a challenge to the NCLAT judgment. NCLAT failed to protect the rights of Pallonji Group, from any future prejudicial conduct, by not amending or striking down Article of Associations that were allegedly “misused” to hurt the interests of the Pallonji Group. The appeal argues that NCLAT should have allowed Pallonji Group protection against any such prejudicial maneuvering, by allowing proportionate representation on the Tata Sons Board.

The plea also seeks for striking down of affirmative vote in hands of select Tata Sons Directors, allowing them to override the entire Tata Sons’ Board. Alternatively, the Mistry plea seeks for similar powers of an affirmative vote to also be allowed to directors of Pallonji Group.

Mistry plea argues that the relationship between Tatas and the Pallonji Group should be looked at as a quasi-partnership arrangement, owing to extensive history and engagement between the two sides. The plea claims that the Pallonji Group is the “guardian of Tata Group” recounting several instances of the Pallonji Group extending financial assistance to Tata Sons.

The Plea argues that engagement between the two groups goes back to the 1920s, and is marked with a deep understanding and personal relationships across decades.

For now, the counsels of both sides agreed that it was felt by both sides that the matters should be heard and decided at the earliest. They argued before the top court that the pendency of such cases over leadership creates uncertainty for large corporate groups such as Tata Sons.

The SC has allowed both sides 4 weeks’ time to complete pleadings. The SC has not confirmed any specific date of hearing and noted that future hearings will be subject to how the COVID situation develops.

First Published:May 29, 2020 1:46 PM IST