MUMBAI: Within hours of a 4:1 vote reappointing incumbent Tata Sons chairman N Chandrasekaran for a third five-year term, a major battle has broken out, with the owners, Tata Trusts, issuing a public statement calling the board decision “illegal” on the grounds that not only was his resignation “accepted by the trusts and had attained finality”, but also that the reappointment vote is a “legal nullity” as the trusts chairman Noel Tata voted against it.
The Tata Sons board had earlier on Thursday approved a fresh five-year term for Chandra, barely a month after he told the board on August 12 that he was not available for a third term after his current tenure ends on February 20, 2027.
The board also agreed, with a 4:1 vote, to proceed with the listing of Tata Sons, the holding company of the $290-billion Tata Group, as mandated by the RBI and something Noel has been bitterly opposed to.
Strangely, one of the four votes that Chandra received came from the trusts’ vice-chairman, Venu Srinivasan, who, like Noel, is a nominee director on the Tata Sons board, which is 66.6 per cent owned by the trusts.
In the public statement issued hours after the board meeting on Thursday, Tata Trusts said it “maintains that Chandra’s decision not to offer himself for reappointment at the end of his current tenure had already been accepted and had attained finality as his decision was freely taken, clearly expressed and not the outcome of any process of review”.
The trusts also said Chandra took the decision to resign and the same was made public without prior intimation to, or deliberations with, the company’s main shareholders, who are the trusts.
“Once such a decision has been publicly communicated, it has consequences which cannot be afterwards undone, since the group’s employees, its lenders and counterparties, the market and the majority shareholder have all proceeded on it,” the trusts said.
The statement also said the trusts formally accepted Chandra’s decision the following day and advised Tata Sons to begin the process of setting up a selection committee to appoint his successor in accordance with the company’s articles of association.
It further said the position of the trusts was reiterated by Noel Tata at the Thursday board meeting.
On why the resolution to reappoint Chandra was illegal, the trusts said the resolution was approved with four directors voting in favour and Noel Tata voting against it. “But the articles of association of Tata Sons require a majority of the trusts’ nominee directors to vote in favour of the appointment of a chairman. This requirement applies both to a first appointment and to the reappointment of an existing chairman.”
“Given that Noel Tata, being one of the trust nominee directors, voted against the proposal, it was rendered legally void and without any basis,” the trusts said, adding that Noel had also submitted a legal opinion from former Chief Justice of India D Y Chandrachud regarding the correctness of the trusts’ position. The statement said the legal opinion was not taken note of by the Tata Sons board.
The trusts’ statement further said the selection committee to find a successor to Chandra will proceed in accordance with the articles of association “to ensuring an orderly and timely leadership transition in the long-term interests of Tata Sons and the Tata group”.
