New Delhi, Sept 20: Tata Trusts has challenged the validity of the Tata Sons board’s September 17 decision to reappoint N. Chandrasekaran as chairman, asserting that the resolution did not meet the requirements prescribed under the company’s Articles of Association (AoA).
In a statement issued on Sunday, Tata Trusts said decisions of the Tata Sons board cannot be determined solely by counting the total number of directors voting in favour of a resolution. It said the AoA require affirmative support from a majority of directors nominated by the Tata Trusts.
Tata Trusts currently has two nominee directors on the Tata Sons board — Venu Srinivasan and Noel Naval Tata. According to the Trusts, both nominees must support a resolution for the special requirement under the AoA to be satisfied.
Noel Tata voted against the resolution concerning Chandrasekaran’s reappointment at the September 17 meeting, while the other Tata Trusts nominee supported it, according to the statement.
“The majority amongst the two is two and not one,” Tata Trusts said, maintaining that the required affirmative support was therefore absent.
The Trusts also disputed the use of a casting vote by independent director Harish Manmani, who chaired the meeting. It argued that a casting vote is relevant only when there is an equality of votes at the overall board level and cannot be used to override the separate requirement relating to Tata Trusts’ nominee directors.
Tata Trusts said there was no “deadlock” at the meeting that required resolution through a casting vote. It described the nominee directors’ right as a protection embedded in the company’s constitutional documents rather than an obstacle to corporate functioning.
According to the Trusts, the resolution to reappoint Chandrasekaran was consequently not validly passed and has no legal effect.
Reliance on Supreme Court ruling
Tata Trusts also referred to the long-running legal dispute involving former Tata Sons chairman Cyrus Mistry, arguing that Tata Sons cannot now disregard provisions of its AoA that it had previously defended before the Supreme Court.
The Trusts said provisions including Articles 104B and 121, which provide affirmative voting rights to Trust-nominated directors, had been challenged during the Mistry litigation.
It noted that while the National Company Law Appellate Tribunal had treated the provisions as oppressive, Tata Sons defended them as legitimate protections available to the majority shareholder.
The Supreme Court in 2020 accepted Tata Sons’ position and overturned the finding that the provisions were oppressive, the Trusts said.
Tata Trusts argued that Tata Sons therefore could not now adopt an interpretation that effectively removes or weakens those protections.
Trusts reject governance-gap argument
The Trusts also rejected the argument that a potential listing of Tata Sons would be necessary to address a corporate governance gap.
It said Tata Sons had voluntarily adopted several governance practices associated with public companies, including independent directors, audit and nomination and remuneration committees, related-party transaction provisions, retirement of directors by rotation and measures relating to prevention of insider trading.
According to Tata Trusts, these standards were adopted well before the current dispute and independently of any proposed listing.
The Trusts said the broader issue was not simply which governance framework should apply to Tata Sons, but the role of the Trusts in representing their longstanding social and philanthropic objectives.
The dispute comes amid differences over the interpretation of Tata Sons’ Articles of Association and the role of Tata Trusts’ nominee directors in major board decisions.
