Tata Trusts Challenges Chandrasekaran’s Reappointment, Invokes Mistry Case

Tata Trusts has stepped up its challenge to N Chandrasekaran’s reappointment as chairman of Tata Sons, arguing that the September 17 board resolution did not meet the requirements laid down in the company’s Articles of Association. 

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The Trusts’ objection centres on the voting rights of its nominee directors. It has also drawn on the legal battle that followed Cyrus Mistry’s removal as Tata Sons chairman in 2016, pointing to the position Tata Sons itself took during those proceedings. 

The latest statement comes days after the Tata Sons board voted 4:1 in favour of giving Chandrasekaran another five-year term. Tata Trusts, which holds around 66% of Tata Sons, maintains that the overall board vote does not settle the matter. 

Trusts point to split among nominee directors 

At the September 17 meeting, the two Tata Trusts nominees on the Tata Sons board were divided over Chandrasekaran’s reappointment. 

Tata Trusts Chairman Noel Tata voted against the proposal, while TVS Motor Chairman Emeritus Venu Srinivasan supported it. 

The Trusts’ case rests on Articles 104B and 121 of Tata Sons’ Articles of Association. According to its interpretation, a board decision of this nature requires affirmative support from a majority of the directors nominated by Tata Trusts, in addition to the wider board vote. 

With only two nominee directors currently on the board, Tata Trusts argues that both would have needed to support the resolution. The 1:1 split, in its view, meant that the required condition was not satisfied. 

On that basis, Tata Trusts has described the resolution approving Chandrasekaran’s third term as having no legal effect. 

Casting vote also disputed 

Tata Trusts has separately challenged the argument that the split between its two nominee directors amounted to a deadlock that could be settled through a casting vote. 

Its position is that a chairman’s casting vote applies when votes are equally divided at the board level. According to the Trusts, it cannot be used to overcome the separate requirement for affirmative support from its nominee directors. 

The Trusts therefore maintains that the 4:1 board result does not change whether the conditions contained in the Articles of Association were fulfilled. 

Cyrus Mistry case brought back into focus 

The dispute has also brought the earlier legal battle involving former Tata Sons chairman Cyrus Mistry back into the picture. 

Tata Trusts said the affirmative voting rights provided under Articles 104B and 121 had been challenged during the litigation that followed Mistry’s removal. 

The National Company Law Appellate Tribunal had held the provisions to be oppressive, with their deletion or restriction sought during the proceedings. Tata Sons opposed that position and defended the provisions as legitimate protections available to Tata Trusts as the majority shareholder, according to the statement cited in the report. 

The Supreme Court subsequently set aside the appellate tribunal’s finding that the Articles were oppressive. 

Tata Trusts is now relying on that history to support its position in the current dispute. Its argument is that Tata Sons had previously defended these protections before the Supreme Court and therefore cannot take a position inconsistent with that earlier stance. 

Chandrasekaran’s second term runs until February 

The disagreement comes after months of uncertainty over Chandrasekaran’s position at the head of Tata Sons. 

His current five-year term runs until February 2027. In August, he had informed the Tata Sons board that he would not offer himself for a third term, following around six months in which the issue remained unresolved. 

The September 17 board vote subsequently backed his reappointment for another five years, but the decision is now being challenged by Tata Trusts on the basis of its interpretation of the company’s Articles of Association. 

Tata Trusts also questions governance case for listing 

The statement also addressed the separate debate over a possible listing of Tata Sons. 

Tata Trusts rejected the argument that a stock market listing was necessary to strengthen governance, pointing out that Tata Sons had already voluntarily adopted several practices associated with public companies. 

According to the Trusts, these include independent directors, an audit committee, a nomination and remuneration committee, provisions covering related-party transactions and retirement of directors by rotation, as well as a code of conduct aimed at preventing insider trading. 

The listing question has gained urgency after the Reserve Bank of India rejected Tata Sons’ application to surrender its registration as a core investment company. 

Tata Trusts’ latest statement therefore places two issues Chandrasekaran’s third term and the debate over listing Tata Sons within a wider disagreement over the Trusts’ role and rights within the Tata structure.