Legal Challenge to Chairman Reappointment
Tata Trusts has escalated its confrontation with Tata Sons, formally asserting that the board resolution reappointing N Chandrasekaran as chairman is legally invalid. In a statement issued on September 20, the Trusts declared that the resolution, passed during the September 17 board meeting, has "no legal effect" and is "void ab initio" (invalid from the outset).
The core of the dispute lies in the interpretation of Tata Sons’ Articles of Association (AoA). While the reappointment proposal received support from four directors and was opposed by one, Tata Trusts argues that the overall board vote is insufficient. Under the AoA, specifically Article 121, board decisions must also receive the affirmative vote of a majority of directors nominated by the Trusts.
The 'Majority of Two' Argument
Tata Trusts, which holds approximately 66 percent of Tata Sons, contends that with only two nominee directors on the board, a majority requires both to vote in favor.
"There are two Tata Trusts nominees on the Board of Tata Sons. Majority amongst two is two and not one," the statement read.
During the September 17 meeting, Noel Tata, the Trusts' chairman, voted against Chandrasekaran’s reappointment, while Venu Srinivasan, the other Trust-nominated director, supported it. The Trusts argue that because one nominee voted against the resolution, the specific condition in the AoA was not met, rendering the resolution invalid regardless of the overall 4:1 board vote.
The Trusts explicitly rejected the use of the chairman’s casting vote in this context. They stated that a casting vote is only applicable when there is an equality of votes at the overall board level, not to resolve a split between Trust nominees or to substitute for the required affirmative support. "A casting vote cannot revive a stillborn resolution," the statement noted.
Precedent from Mistry Litigation
In defending its position, Tata Trusts invoked the legal battle that followed the removal of former chairman Cyrus Mistry. During that litigation, Articles 104B and 121 of the AoA were challenged. Article 104B grants the Sir Dorabji Tata Trust and Sir Ratan Tata Trust the right to nominate one-third of the board, while Article 121 imposes the additional voting requirement.
The Trusts pointed out that Tata Sons had previously defended these provisions before the Supreme Court as legitimate protections for its majority shareholder. Although the National Company Law Appellate Tribunal had initially held some provisions oppressive, the Supreme Court subsequently set aside that finding.
"The Company cannot now disown the protection it went to the Supreme Court to preserve," the Trusts stated. "They are either in the Articles or they are not. Tata Sons has already told the highest court in the country that they are."
Rejection of Listing as Governance Solution
Tata Trusts also addressed the ongoing pressure to list Tata Sons on stock exchanges. This pressure has intensified after the Reserve Bank of India (RBI) rejected Tata Sons’ application to surrender its registration as a Core Investment Company, requiring it to list within a prescribed timeline as an upper-layer non-banking financial company.
The Trusts argued that listing is not a prerequisite for good governance, noting that Tata Sons has voluntarily adopted several public-company practices, including independent directors, audit committees, and insider trading codes. "A company that adopted these standards by choice is not a company in need of the discipline that listing is said to supply," the statement said.
The Trusts emphasized that the central issue is not regulatory framework but ensuring the group’s century-old structure continues to protect the philanthropic objectives of the Trusts. Chandrasekaran had previously indicated he would not seek another term after his current tenure ends in February 2027, while Noel Tata has maintained that the group should begin the leadership transition process immediately.