Tata Sons counters legal challenge to chairman reappointment
Tata Sons has formally rejected the opposition raised by Tata Trusts chairman Noel Tata regarding the reappointment of N Chandrasekaran as the company's chairman for a third term. In a letter dated September 24, Tata Sons asserted the validity of the board resolution passed on September 17, citing fresh legal opinions from former Chief Justice of India Uday U Lalit and retired Supreme Court judge B N Srikrishna.
The letter, issued by Tata Sons company secretary Suprakash Mukhopadhyay and copied to all directors, was a direct response to a September 20 communication from Noel Tata and the Tata Trusts. The Trusts had argued that the reappointment was legally invalid under the company’s Articles of Association (AoA).
The core legal dispute: Article 121
The crux of the disagreement lies in the interpretation of Article 121 of the AoA. This article mandates that board decisions taken by a majority of directors must also have the affirmative vote of a majority of directors appointed under Article 104B, which pertains to Tata Trusts’ nominees. Additionally, Article 121 grants the chairman a casting vote in cases of an "equality of votes."
During the September 17 meeting, N Chandrasekaran did not vote on his own reappointment. Of the five directors who voted, four supported the proposal, including Trust nominee Venu Srinivasan. Noel Tata, the other Trust nominee, voted against it. Harish Manwani, who presided over the meeting, exercised a casting vote following the one-to-one split between the two Trust nominees.
The Tata Trusts contend that a majority of two Trust nominees requires both to vote in favor, and that the casting vote is only applicable if the entire board is tied. Since Noel Tata voted against the proposal, the Trusts argue the resolution was invalid from the outset. They have cited an opinion from former CJI D Y Chandrachud to support this interpretation.
Legal opinions support Tata Sons' position
In response to the objection, Tata Sons sought and received legal opinions supporting its actions. Former CJI Uday U Lalit stated that the split among the directors appointed under Article 104B created an "occasion" for the chairman to use the casting vote. He concluded that the September 17 resolution was "validly passed."
Retired Justice B N Srikrishna endorsed the procedure, stating it was "perfectly consonant with the letter and spirit of Article 121." He argued that the provision should be interpreted to prevent a division among nominees from paralyzing the board's ability to conduct business.
Furthermore, Justice Srikrishna addressed the decision by Trust nominee Venu Srinivasan to support the reappointment despite his colleague's opposition. He noted that a director's statutory fiduciary duty to the company takes precedence over any contractual duty to the nominating entity when the two conflict. "In the circumstances, Mr. Venu Srinivasan rightly acted pursuant to the statutory fiduciary duty," Srikrishna said.
Tata Sons also referenced an earlier opinion from senior advocate Sudipto Sarkar, shared with the board on September 17. Sarkar’s view supported the use of a casting vote when Trust-nominated directors are evenly divided. He also clarified that Article 118, which governs the selection of a new chairman via a committee, does not apply to the reappointment of the incumbent, whose current term runs until February 2027.