Legal opinion is almost vertically split on Mehli Mistry’s argument regarding the interpretation of the October 2024 resolution taken unanimously by Tata Trusts.
While some legal experts agree that the resolution implies that all existing trustees should be reappointed as trustees for life, an equal number suggest that the award of trusteeship for life only applies to those unanimously reappointed.
“It will finally depend on judicial interpretation in this case,” a legal expert said.
Experts have also pointed out that in such situations, the provisions in the Trust Deed will be binding, and in this case, it is not clear if the deeds of the respective trusts – mainly the Sir Dorabji Tata Trust and the Sir Ratan Tata Trust which together hold 51% in Tata Sons – have a provision for awarding trusteeship for life.
“In the absence of any such provision, any resolution by the Trustees, even if passed as claimed in the October 2024 meeting, giving life term to Trustees would be contrary to the law and against the fiduciary duties of such Trustees,” Gaurav Dani, founding partner, CMS IndusLaw told FE.
There is however a precedent for what happens when a resolution and the governance framework are in conflict.
“For a precise determination of this issue, it is essential to review the trusts’ governance framework. A resolution, unless it expressly amends the framework through the prescribed process and authority, may not suffice to alter the governance framework itself. Any inconsistency between the framework and the resolution must then be resolved in accordance with the terms of the deed, law and judicial precedent,” Majid Afsar Siddiqi, partner, Lex Consult added.
Mistry, who was ousted from Tata Trusts on Tuesday, had suggested to fellow trustees that the October 2024 resolution implies that all existing trustees must be reappointed when their current tenure ends and awarded trusteeship for life. However, some of the trustees are said to have taken a contrary view that the resolution implies that an existing trustee can only be made trustee for life, only when reappointed unanimously. One trustee pointed out that the resolution cannot be interpreted to mean that a matter as significant as the reappointment of trustees be reduced to a mere formality.
If the resolution of October 2024 is in conflict with the provisions of the respective trust deeds, then Mistry has grounds to challenge Venu Srinivasan’s reappointment last week. Srinivasan was unanimously reappointed to the Trusts board, and under the resolution passed last October, is now a lifetime trustee.
However, Mistry’s conditional vote in favour of Srinivasan’s reappointment may not hold water in court. “Especially in a trust which handles philanthropic endeavours of a family, voting is done in good faith, and cannot be quid pro quo,” another corporate lawyer said.
Mistry can nonetheless approach the Charity Commissioner of Maharashtra, a quasi-legal body that decides and settles disputes regarding appointment of trustees at trusts. If no relief is found with this authority, Mistry can take the matter to the Bombay High Court, experts said.
Mistry declined to comment on queries from FE regarding the same.
Most experts however said it’s a matter of wait and watch for now. “Transitions in leadership within a large business group always bring a reshuffling of how decisions are made and what the strategic priorities will be — this isn’t unique to us, it happens around the world. What we’re seeing in this case are merely the initial tremors or precursor of that broader realignment, if any that may take place in near future,” Nitin Potdar, independent corporate & M&A lawyer said.