Meanwhile, Bloomberg has reported that the dispute between Tata Trusts and Tata Sons could lead to a legal battle. Noel Tata may challenge the decision in court, while both sides are reportedly working to assemble legal teams.
Tata Trusts has said that the proposal to reappoint N Chandrasekaran as chairman of Tata Sons is legally invalid because it did not receive the mandatory support of both directors nominated by the Trust.
According to Tata Trusts, the overall 4:1 vote was incorrect because one of its two nominees opposed the proposal, meaning a separate requirement under Tata Sons’ Articles of Association was not fulfilled.
Tata Trusts holds approximately 66% ownership in Tata Sons and has two elected directors on its board. According to the Trusts, a majority among its two nominees means that both directors must support the proposal.
The Trusts also rejected the argument that its opposition created a deadlock on the board and said the chairman’s casting vote could not override the requirement. Tata Trusts maintained that the proposal to reappoint Chandrasekaran was invalid from the outset.
The statement from Tata Trusts came after the Tata Sons board voted 4:1 on September 17 to reappoint Chandrasekaran as chairman of the group’s holding company. Noel Tata, chairman of Tata Trusts and a director on the Tata Sons board, voted against the proposal and challenged its validity.
The dispute centres on the rules governing Tata Sons, including the company’s Articles of Association, which contain the provisions under which the company operates. Tata Trusts has argued that decisions of the board cannot be determined solely by counting the total number of votes. According to the Trusts, a positive response from a majority of the directors nominated by the Trusts is also required.
In its statement, Tata Trusts said the Articles of Association of Tata Sons do not allow a board decision to be determined solely by the number of directors voting in favour. It argued that since one of the two Trust-nominated directors opposed Chandrasekaran’s reappointment, the proposal could not be approved.
The Trusts further argued that this requirement was separate from the overall board vote. Therefore, it said, the 4:1 result did not make the proposal valid. According to Tata Trusts, the condition was either fulfilled or not fulfilled, and in this case, it was not.
Tata Trusts also rejected the suggestion that its opposition to the proposal had created a deadlock that could weaken the company. The statement said a casting vote is given to the chairman when the number of board members is equal. The Trusts argued that the provision could not be used in this case because there was no tie at the overall board level.
With these arguments, Tata Trusts has maintained that Chandrasekaran’s reappointment cannot be legally justified, setting the stage for a potential legal confrontation between Tata Trusts and Tata Sons.
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