Tatas move Supreme Court over pledged shares by SP Group: Report

Tata Sons has approached the Supreme Court (SC) with an “urgent application” to stop the Shapoorji Pallonji Group (SP Group) from raising funds against security of their shares in Tata Sons.

Tata Sons moved the court on September 5, a day after SP Group signed a definitive deal to raise Rs 3,750 crore with marquee investors on security over their interests in Tata Sons, The Economic Times reported.

Asking the court to dismiss Tata Sons’ application, the SP Group said  that “mere creation of a pledge on shares” does not mean transfer of share title as established by retired SC judge Justice BN Srikrishna.

In his order staying an NCLAT verdict, Justice Srikrishna had said Cyrus Investments and Sterling’s pledge of shares in Tata Sons to a third party was not controlled by the Article 75 of the Articles of Association (AoA) of Tata Sons and didn't amount to transfer of title to the shares.

Tata Sons has in its recent application also asked the SC to allow it to use Article 75 to “squeeze out” the Mistry family by buying their shareholding at market value.

An SP Group spokesperson questioned the timing, pointing out that fundraising was also carried out in January 2020 and that security documents “clearly record that lenders would comply with AoA of Tata Sons” in case pledged shares are enforced.

Moneycontrol could not independently verify the report.

Further, Tata Sons has also communicated with lenders such as Canadian investor Brookfield advising them against participating in the “illegal” Tata sons share pledge by SP Group. Sources told the newspaper this is significant as most lenders have sought a green light from Tata Sons.

Brookfield, Tata Sons and Tata Trusts did not respond to queries, the ET report said.

A Tata Sons executive told the newspaper “there is clear restriction as it is a closely held holding company” and AoA clauses state that the first right of refusal rests with Tata Sons.