Tata Capital, Tata Power and More Tata Stocks Fall as Tata Trusts-Tata Sons Battle Intensifies

Several Tata Group stocks traded lower on Monday, September 21, extending their losses from the previous session as the dispute between Tata Trusts and Tata Sons over N Chandrasekaran’s reappointment as chairman intensified. 

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Tata Capital fell around 3% to ₹341 in Monday’s trade, while Tata Power declined 2.5% to ₹365.55. Tata Investment Corporation, Tata Technologies and Tata Elxsi were also among the group stocks trading under pressure. 

The declines came after Tata Trusts challenged the Tata Sons board’s decision to give Chandrasekaran another five-year term. The Trusts, which hold about 66% of Tata Sons, maintain that the resolution did not meet requirements under the company’s Articles of Association. 

Tata Capital, Tata Power among stocks under pressure 

Some of the Tata Group counters witnessed selling activities on Monday. 

Tata Investment Corporation ended 2.3% lower at ₹685.90, while Tata Technologies closed 2.2% lower at ₹707. Tata Elxsi closed 2% lower and made a new 52-week low at ₹3,268. 

Tata Motors Passenger Vehicles closed 1.5% lower at ₹299.25, while its commercial vehicles business closed 1% lower. 

Tata Communications closed 1.5% lower at ₹1,746.80, while Tata Teleservices closed 1.4% lower at ₹35.25. 

But not all Tata counters witnessed selling pressure on Monday. Tata Chemicals witnessed some recovery after losing as much as 4% at one point during the day and closed 0.6% higher. Meanwhile, TCS ended 1% higher after initially losing 1%, while Tata Steel gained 1%. 

Dispute centres on Chandrasekaran’s reappointment 

The latest movement in Tata Group shares came as the disagreement between Tata Trusts and Tata Sons moved towards a possible legal battle. 

The Tata Sons board had decided last week to give Chandrasekaran another five-year term as chairman. Tata Trusts has challenged the validity of that decision. 

According to the Trusts, Tata Sons’ Articles of Association require the support of a majority of directors nominated by Tata Trusts for the appointment or reappointment of the chairman. 

There are currently two Trust-nominated directors on the Tata Sons board. Noel Tata opposed Chandrasekaran’s reappointment, while Venu Srinivasan supported it. 

The overall board vote was 4-1 in favour of Chandrasekaran’s extension. Tata Trusts, however, maintains that the overall vote does not resolve the separate requirement concerning its nominee directors. 

Tata Trusts disputes use of casting vote 

Another point of disagreement concerns the chairman’s casting vote. 

Tata Trusts maintains that a casting vote applies when there is an equality of votes at the overall board level and cannot be used to meet the separate voting requirement applicable to Trust-nominated directors. 

On that basis, the Trusts has maintained that the September 17 resolution reappointing Chandrasekaran was not validly passed and has no legal effect. 

It has also rejected the argument that opposition to the resolution created a deadlock within Tata Sons. 

Legal action under consideration 

The dispute may now move beyond the Tata Sons boardroom. 

According to the report, Tata Trusts is seeking judicial intervention to maintain the status quo on Chandrasekaran’s tenure, with possible proceedings before the National Company Law Tribunal among the legal options being considered. 

Senior advocate Abhishek Singhvi has been appointed to represent Tata Trusts. 

The Trusts has also referred to the earlier Cyrus Mistry case, pointing to Tata Sons’ position before the Supreme Court on the affirmative voting rights available to Trust-nominated directors under Articles 104B and 121. 

Tata Sons listing also remains in focus 

The leadership dispute comes alongside questions surrounding the future structure and possible listing of Tata Sons. 

The Reserve Bank of India has rejected Tata Sons’ request to surrender its registration and continue as a private company, bringing the potential listing back into focus. 

Tata Trusts has also challenged the argument that listing Tata Sons is necessary to improve corporate governance. It pointed to existing governance provisions covering areas such as independent directors, audit and nomination committees, related-party transactions, retirement by rotation and insider trading. 

With Tata Trusts challenging the validity of Chandrasekaran’s reappointment and legal options being considered, the dispute over the leadership and future structure of Tata Sons remains unresolved.