The cloud of uncertainty hanging over India’s biggest business conglomerate just got darker as more of the infighting within the Tata Group tumbled out in the open. Even as the Tata Sons board on Thursday decided to reappoint N Chandrasekaran to the chair for a fresh five-year term—raising hopes of a resolution to the leadership issue—Tata Trusts led by Noel Tata termed the appointment illegal according to the company’s Articles of Association. Earlier on Thursday, the board also went against Noel’s wishes while giving the go-ahead for Tata Sons’ stock listing. Four of the six board members voted in favour of both proposals. Noel voted against, while another Tata Trusts nominee, Venu Srinivasan, voted in favour.
There is, however, another twist in this long-running chamber drama. Tata Sons’ Articles of Association mandate that no decision can be taken by the board without the backing of all nominees from Sir Dorabji Tata Trusts and Sir Ratan Tata Trusts. Also, these decisions will have to be ratified by the annual shareholders’ meeting of Tata Sons, where the trusts can call the shots.
For themselves, the trusts made no bones about their unhappiness over the day’s events. They stated that the board could not lawfully hold a meeting or pass a resolution on the chairman’s appointment or reappointment unless both their nominee directors voted in favour.
The group now stares at a longer period of ambiguity as regulatory pressure to go public grows. The Tata Trusts vehemently oppose the listing of Tata Sons, which would bring on greater scrutiny from shareholders and regulators. A listing also means the trusts would have to loosen their grip over the $230-billion business empire. With the RBI rejecting the trusts’ last-ditch attempt to avoid Tata Sons’ listing, the only option for the group is a legal battle with the regulator. The RBI has already filed a caveat in the Bombay High Court anticipating that the Tatas may move court against its directive.
The country can ill afford to see the Tata Group marred by infighting. It’s not only bad optics for the company, but the situation is harmful for the broader economy in which the Tatas are at the forefront of India’s strategic sectors such as semiconductors, defence, software and electronics. It may be time for an arbitrator—not a court—to find an amicable solution.