Tata Sons Defends Chandrasekaran’s Reappointment, Sends Three Legal Opinions to Tata Trusts

The disagreement over N Chandrasekaran’s third term as Tata Sons chairman has moved beyond the September 17 board meeting, with Tata Sons sending Tata Trusts three legal opinions to support its position that the reappointment was valid. 

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The communication was sent in response to questions raised by Tata Trusts after the board meeting, where the two sides differed over how Tata Sons’ Articles of Association should apply to Chandrasekaran’s reappointment. 

Tata Trusts, the largest shareholder in Tata Sons, is now studying the response before deciding whether to pursue legal action over the resolution. 

Neither Tata Sons nor Tata Trusts commented on the matter. 

Three legal opinions back Tata Sons’ position 

At the heart of the disagreement is the resolution passed at the September 17 Tata Sons board meeting granting Chandrasekaran another five-year term as chairman. 

Tata Sons has backed its position with legal opinions from senior advocate Sudipto Sarkar, former Supreme Court judge B N Srikrishna and former Chief Justice of India U U Lalit. 

Sarkar’s opinion was dated September 16, a day before the board meeting. The other two opinions were obtained subsequently. 

The legal arguments largely revolve around Article 121 of Tata Sons’ Articles of Association, which deals with matters including majority voting, affirmative voting and the chairman’s casting vote. 

Srikrishna’s interpretation was that the manner in which the resolution was passed was consistent with Article 121. His reasoning noted that while board decisions require a majority and also involve affirmative voting requirements for directors appointed under Article 104B, Article 121 additionally provides a casting vote to the chairman when votes are equal. 

Lalit also concluded that the September 17 resolution was validly passed. His opinion was that an equality of votes among the directors appointed under Article 104B allowed the presiding chairman’s casting vote to satisfy the requirement under Article 121. 

Tata Trusts have a different interpretation of the regulations 

Tata Trusts had taken an independent legal advice from former Chief Justice of India D Y Chandrachud during the September 17 meeting. 

According to the Trusts, the resolution to appoint Chandrasekaran for a third term was nullified by lack of required voting majority. 

The conflict of interest came into play especially in regard to the votes of the two Tata Trusts nominated directors on the Tata Sons' Board of Directors. 

While Noel Tata was against the resolution, Venu Srinivasan voted for it. 

With both of the Trusts' nominees voting differently on this issue, the question was whether a casting vote could be cast. 

In the period when Chandrasekaran was considering his reappointment, he had decided to disqualify himself from the meeting. The independent director, Harish Manwani chaired the session. 

Article 118 is also part of the disagreement 

Another question concerns Article 118 of the Articles of Association, which deals with the appointment and selection process for the Tata Sons chairman. 

According to Sarkar’s opinion, Article 118 would not apply to Chandrasekaran’s reappointment because the provision applies when a new chairman is being appointed. 

That interpretation forms another part of Tata Sons’ defence of the September 17 resolution. 

The positions presented by the two sides therefore differ not only on the use of a casting vote under Article 121, but also on how the company’s internal rules should apply when an existing chairman is being given another term. 

Tata Trusts weighs its next move 

Tata Trusts is reviewing the communication and the three legal opinions sent by Tata Sons before deciding its next course of action. 

According to the report, the Trusts could decide whether to challenge the resolution legally after completing that review. 

Supreme Court advocate Abhishek Singhvi had earlier said in a social media post that he was joining the matter to challenge Chandrasekaran’s reappointment on behalf of Tata Trusts. 

Tata Sons, meanwhile, has also been preparing for the possibility of litigation, with its legal team led by former solicitor general Harish Salve. 

No legal action arising from the latest communication was reported as having been initiated at the time of the Business Standard report. 

September 17 Board Meeting is key to the controversy 

Apart from Chandrasekaran, those who participated in the September 17 board meeting include Tata Sons Executive Director & CFO Saurabh Agrawal, independent directors Harish Manwani and Anita George and Tata Trusts representatives Noel Tata and Venu Srinivasan. 

This has since been turned into a debate about the interpretation of the guidelines of Tata Sons. 

Tata Sons maintains that Chandrasekaran’s reappointment was valid and has now put three legal opinions behind that position. Tata Trusts has relied on a different legal interpretation and is examining whether the matter should be taken further. 

For now, the disagreement remains unresolved, with Tata Trusts’ response to the latest communication likely to determine whether the dispute stays within the boardroom or moves into legal proceedings.