Ratan Tata Completely Bans All Deals with Shaporoji Pallonji Group

Ratan Tata Completely Bans All Deals with Shaporoji Pallonji Group

In 2013, Tata sons chairman Cyrus Mistry, and then Emeritus-chairman Ratan Tata had an early dispute and lack of agreement over an issue that stated complete banning of all the transactions between Tata Group Companies Shapoorji Pallonji Group (Mistry’s Family Conglomerate).

The communication between Ratan Tata and Mistry in the year 2013 clearly showed Tata provoking and pushing Mistry to ensure a complete ban on every transaction taking place between the two groups, and raising this issue becomes ‘public’, if it wasn’t resolved.

On the other hand, Mistry resolved to use legal safeguards for any such transaction rather than total ban.

This ban finally came into effect in the month of October the same year. Mistry wrote to all Tata Subsidiaries and companies, asking them not to engage with Shapoorji Pallonji Group for any construction and engineering contracts. A list was tabulated for this issue in the month of Sept, 2014 (11 months after the ban), showcasing the value of all existing contracts between the groups at approx. INR 2,900 crores.

Sources estimate that around INR 960 crore worth of contracts were initiated between Dec 2012 and Oct 2013 in the same period when Mistry was the chairman of Tata Sons.

The people involved and close with Mistry said – “The values of all the contracts that SP group earned from the Tata group came down to zero from 1,000 crore in just three years.” It was always clear and agreed upon that all other party transactions would never compromise with Mistry’s involvement for the beneficiary ownership in SP group.

A board meeting of Tata Sons decided to remove and replace Mistry in Oct 2016, bringing back the retired Ratan Tata as the new Interim chairman. Mistry fought hard to withhold this decision in various forums, through public statements and letters to Tata Sons Board, and filing a case against Tata Sons at the National Company Law Tribunal.

Mistry had always disagreed with the company’s announcement of total ban with SP group, and finally came around in Oct 2013. Tata had sent an email on Oct 4, taking stand that the only way to avoid any kind of conflict of interests can be achieved by not initiating any transaction between either of the groups, where Mistry had 50 percent of ownership. Tata was worried about the ethical standards and value of his group.

In July 2014, Tata asked for the details of all the existing contracts between the two groups in a proper prescribed format. The information was provided to Tata in Sept 2014.

Sources from the Mistry camp said that the petitioners and Cyrus Mistry would definitely file their rejoinder for all the facts and issues for the proceedings. Since, these proceedings are before a judicial tribunal, a fitting reply will be filed soon before the judiciary.

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