Tata Sons Leadership Dispute
The reappointment of N Chandrasekaran as executive chairman of Tata Sons has been thrown into uncertainty following an opinion by former Chief Justice of India DY Chandrachud. According to a report by CNBC-TV18, Chandrachud stated that the reappointment requires the affirmative support of Tata Trusts' nominee directors, which was not obtained.
Board Meeting and Voting
At a Tata Sons board meeting on September 17, directors voted 4-1 in favour of giving Chandrasekaran another five-year term. However, Chandrachud's opinion suggests that the reappointment may not be valid due to the lack of support from one of the Tata Trusts' nominee directors.
Affirmative Voting Rights
The opinion centres on the affirmative voting rights available to certain directors under the Articles of Association of Tata Sons. It states that the chairman's casting vote cannot be used to make up for the absence of the required affirmative vote from a particular category of directors.
Implications and Future Developments
The development adds legal weight to Noel Tata's opposition to the board decision. Noel Tata had voted against Chandrasekaran's appointment, stating that his veto was wrongfully overridden. The Tata Trusts collectively own about 66% of Tata Sons, making their support crucial for major decisions.
The focus will now turn to the adjourned annual general meeting (AGM), which has to be held by December 31. Chandrasekaran is due to retire by rotation as a Tata Sons director, and his continuation as a director will require shareholder approval. The Tata Trusts could potentially seek to remove Chandrasekaran at the AGM.
Regulatory Challenges
The leadership dispute comes alongside Tata Sons' regulatory challenge over its Core Investment Company status. The RBI recently rejected its request to surrender that registration, bringing the listing requirement for upper-layer NBFCs back into focus.