Legal experts say Tata Trusts’ proposal to merge two operating companies into Tata Sons offers a credible route to changing the holding company’s regulatory status. Its success, however, would depend on whether the merged entity genuinely falls outside the definitions of a non-banking financial company (NBFC) and a core investment company (CIC)—and whether the Reserve Bank of India accepts that assessment.
The proposal would merge Tata Electronics Systems Solutions (TESS) and Tata Consulting Engineers (TCE) into Tata Sons. It needs the Tata Sons board’s approval before proceeding through shareholder, regulatory and corporate approval processes.
Rohit Jain, managing partner at Singhania & Co, said the amalgamation could create a genuine operating-cum-holding company that no longer meets the conditions for classification as an NBFC or CIC. Regulatory status, however, cannot change through balance-sheet engineering alone, he said.
“The amalgamation requires the prior no-objection of the Reserve Bank of India, completion under the Companies Act, 2013, and subsequent surrender of the certificate of registration,” Jain said. He called the proposal structurally sophisticated, but said its success remained dependent on the regulator.
Tushar Agarwal, founder and managing partner of C.L.A.P. JURIS, Advocates & Solicitors, said a demonstrable change in Tata Sons’ asset and income profile would provide a credible legal basis to seek reclassification or surrender its registration.
The timing could invite close scrutiny. Tata Sons was identified as an Upper Layer NBFC in 2022. The framework requires such entities to list within three years, a deadline that expired in September 2025. The RBI has since rejected Tata Sons’ application to surrender its registration.
“In that backdrop, the regulator could scrutinise whether the restructuring represents a substantive change in business character or merely a transaction designed to achieve a regulatory outcome. The stronger legal position for Tata Sons would therefore be to demonstrate that the operating businesses are being integrated on a genuine, commercially sustainable basis,” Agarwal said.
Experts cited Shanghvi Finance to show that a change in circumstances can lead to a change in regulatory status. The company, also placed in the Upper Layer in 2022, repaid its borrowings and was permitted in May 2023 to surrender its NBFC registration and operate as an unregistered CIC. But they cautioned against treating it as a decisive precedent: Tata Sons is much larger, and the RBI has already rejected its request to surrender its registration.
“The RBI is likely to view this restructuring with regulatory scepticism as a second exit is proposed within a fortnight of the first being refused,” said Nitika Jain, partner at CMS IndusLaw.
HP Ranina, a Supreme Court advocate, raised a separate question about the RBI’s power to require a listing. In his view, even if the RBI refuses a no-objection certificate for the merger, that would not necessarily mean Tata Sons must list. He argued that Section 45JA of the RBI Act empowers the central bank to issue binding directions on matters such as accounting, provisioning, capital adequacy and deployment of funds, but does not authorise it to compel a public listing. That is his legal interpretation; the RBI’s Upper Layer framework expressly requires listing within three years of identification.
If the Tata Sons board approves the proposal, the companies would still need to complete the applicable RBI, shareholder and National Company Law Tribunal processes before the merger could take effect. Any change to Tata Sons’ registration would then require the RBI’s consideration.