Earlier in September 2024, the Supreme Court had rejected the review petition against its judgement.
The financial implications of this judgement, which overruled an earlier judgement of seven judges rendered in 1989, is expected to be not inconsequential.
Tata Steel, in the annual report for FY23-24, had indicated the contingent liability on account of this litigation at Rs16,573 crore.
Since the annual report was issued before the delivery of the judgement, there cannot be a serious quarrel in viewing this as anything but a contingent liability.
Its first quarter (Q1) results for FY24-25 were issued within a week of the judgement being delivered on 25 July 2024. Possibly, the paucity of time to clinically deal with the sudden shock of this development only elicited a note in the published results!
A relevant portion of the note is extracted below:
In just a single quarter, the potential liability moved up by about Rs776 crore.
It was anticipated that in publishing the results for Q2FY2025 a clear accounting approach would be indicated by the company.
However, in a curious volte face, in the published results for Q2FY2025 dated 6 November 2024, the company issued the following notes in the financials.
This is quite incomprehensible that when the Court had passed a judgement and established the rights of the states to levy the tax, the company not only did not compute a charge for the possible liability in its revenue account, but even chose to remove the disclosure of the contingent liability it was doing for many years!

Stranger is the fact that there is no whisper in the audit report on these developments and the possible and potential impairment to the reserves due to the past liability being crystallised, nor even to the stand of the company to not disclose the contingent liability.
The rating agency, Moodys, issued a rating for the company’s debt securities in August 2024 and commented on the issue of the additional cost implications of the potential state tax levies after the judgement of the court. A portion of the same is extracted here:
An aspect of the above that may attract the attention is the reference to the ‘prudently earmarked contingent liabilities for state taxes since 2005’
There are two aspects to comment on this. The first is that Moodys appears not to have issued any supplemental or corrigendum since the publication of the Q2FY2025 results where the company did away with disclosure of the contingent liabilities.
The second and more worrying aspect is that a reputed rating agency views disclosure of a contingent liability as a ‘prudent earmarking’!
Unless Tata Steel had set apart a sinking fund for the potential liability, there is no sense in using the term ‘prudent’ for mere disclosure of the liability. Imagine the amount of money lent on the faith of credit ratings in the country!
The results for Q3FY2025 is expected on 27th January and, thoughtfully, the company has moved the curative petition on 17 January 2025, so that the accounting note can be expanded to include one more contingency of the outcome of such a move!
Maybe another expert legal opinion may support neither making a provision in the books nor disclosing a contingent liability, till the outcome of the petition!

Purely as a fact, the chairman of the audit committee, Deepak Kapoor is the retired chairman of PricewaterhouseCoopers complex in India which is the present auditor.
Mr Kapoor received the highest remuneration among all IDs (independent directors) of Rs167.30 lakh besides representing on two overseas subsidiaries drawing an additional remuneration of CAD16,095 and £46,974, as per the annual report for FY2024.
A question that may loom large in many readers’ minds is whether a curative petition would bring any result when the judgement in question is that of a constitution bench of nine judges presided over by the then CJI (chief justice of India), justice DY Chandrachud.
It was also not a unanimous verdict as justice BV Nagarathna had dissented on all aspects of the conclusions reached by the other eight. A judgement with a dissent stands on a stronger footing of better application of mind of all the judges than perhaps a unanimous decision. This comment is made in all earnestness with great respect to the judiciary.
Except for justice Chandrachud who has since laid down office, the other eight judges are still in harness.
According to the practice said to prevail in regard to dealing with curative petitions, it has to be first circulated to a bench of the three senior-most judges, as well as the judges who passed the judgement complained of, if available.
It is only when a majority of the learned judges on this bench conclude that the matter needs hearing that it should be listed before the same bench (as far as possible) which may pass appropriate orders.
It shall be open to the bench at any stage of consideration of the curative petition to ask a senior counsel to assist it as amicus curiae. In the event of the bench holding at any stage that the petition is without any merit and vexatious, it may impose exemplary costs on the petitioner.
How often or common is it for the highest court of the land, having provided a decision that often is a culmination of a judicial process that has travelled a long distance over many tiers of the system, to acknowledge an error in its conclusion and reverse its own verdict?
While commenting on whether the judgements of the US Supreme Court should necessarily remain unchanged, justice Robert Jackson, in Brown vs Allen (1953), said, “We are not final because we are infallible, but we are infallible only because we are final.”
The conventional wisdom is that the decision of the Supreme Court shall be final and conclusive of an issue litigated.
Expounding the rarest of instances when such a curative petition can be entertained, justice Syed Shah Quadri, speaking for himself and four other justices (Rupa Ashok Hurra vs Ashok Hurra & Anr (April 2002), counted,
“(1) violation of principles of natural justice in that the petitioner was not a party to the lis but the judgement adversely affected his interests or, if he was a party to the lis, he was not served with notice of the proceedings and the matter proceeded as if he had notice and
(2) where in the proceedings a learned Judge failed to disclose his connection with the subject-matter or the parties giving scope for an apprehension of bias and the judgement adversely affects the petitioner,”
as possible reasons for a curative petition to survive.
The judge also added, that to perpetuate an error was no virtue but to correct it was a compulsion of judicial conscience. And to prevent abuse of the court’s process and to cure a gross miscarriage of justice, it may reconsider its judgements in exercise of its inherent power.
It was also prescribed that the petitioner, in the curative petition, shall aver specifically that the grounds mentioned therein had been taken in the review petition and that it was dismissed by circulation. The curative petition shall contain a certification by a senior advocate with regard to the fulfilment of the above requirements.
The most recent instance of the reversal of a decision in a curative petition is in the matter of Delhi Metro Rail Corporation which contested as incorrect the decision of the Supreme Court rendered in the year 2021 in the dispute between itself and Delhi Airport Metro Express P Ltd, a contractor for executing the airport metro project.
The curative petition succeeded in restoring the order of the division bench of the Delhi High Court, which had been overturned by a bench of two judges of the Supreme Court.
There are differing views of the experts whether the route of curative petition was correctly invoked by the court in this case as it was a matter of a commercial dispute and the decision resulted in overturning a decision of an arbitral tribunal rendered by subject matter experts like engineers.
The issue raised in this article is not about the correctness of Tata Steel knocking at the doors of the court through a curative petition. That is well within their rights to explore and lies within the ambit of the judges to admit or deal with it in any other appropriate manner.
The change in the stand that no present liability existed or can be estimated due to uncertainty in the way the main judgement would be implemented looks highly debatable.
To expect the states that are fiscally suffocated to forego collecting the taxes which the constitutional court has sanctioned is perhaps a triumph of delusion over commonsense!

Disclosing a contingent liability, instead of making a provision in the books, is in itself a questionable approach, especially after the delivery of a decisive judgement and the review petition rejected. Often the audit committee and the auditors are indulgent in such matters.
The usual spiel is that if the liability is provided in the books then the courts may direct the payment of the same and not be impartial in deciding the matter. This is nothing short of viewing the judiciary as a mercenary.
The national financial reporting authority (NFRA) has recently issued some guidelines to audit committees to function more effectively and has promised to issue more such guidance. They should take up this issue as a case study and opine if, in the given set of facts in the public domain, the audit committee acted fairly, without being deterred by the grandeur of the company involved in the issue!
Once the curative petition’s outcome is known and if the original decision stands, the company would have to deal with both the aspect of provisioning and the payment of the liability.
As far as the second is concerned, the Supreme Court itself has, in a rare gesture of indulgence to the companies, allowed the accumulated amounts to be discharged over 12 years with no interest on the deferment over so many years.
With regard to the effect on the P&L (profit & loss) account, given the current challenges faced by the industry due to low steel prices, the company may find good reasons to keep the matter open on some pretext like the uncertainty in the nature of the levy by the states where it has mining operations and hope for a better year in FY25-26 or later to find space for the provision.

This adversity is a good reason for the company to explore a way to monetise its holdings in Tata Sons P Ltd, which is furiously resisting the regulatory requirement to list, and seeks to remain private.
A listed entity like Tata Steel has no logic to tie up potential cash in an unlisted private company, even if that be the group-holding entity. This type of cross-holding may be common in less well-governed family-managed companies, but not expected of the vaunted Tata group!
Even at a conservative valuation as per a report in the Economic Times (ET) a few months back, the 3.1% that Tata Steel holds shall be worth around Rs25,000 crore. If Tata Sons wishes not to list it should offer an exit to other group entities in some phased manner by buying back the shares.
It will be mining some gains for Tata Steel to offset the mining taxes!
(Ranganathan V is a CA and CS. He has over 44 years of experience in the corporate sector and in consultancy. For 17 years, he worked as Director and Partner in Ernst & Young LLP and three years as senior advisor post-retirement handling the task of building the Chennai and Hyderabad practice of E&Y in tax and regulatory space. Currently, he serves as an independent director on the board of four companies.)