Questions over whether Tata Sons can validly hold its annual general meeting (AGM) on August 18 may not immediately threaten N Chandrasekaran’s continuation as a director, legal experts said. If the meeting fails to achieve the requisite quorum, the resolution seeking his reappointment as a director would simply be deferred rather than automatically resulting in his office being vacated, they said. Such an interpretation could provide relief to Chandrasekaran, whose tenure as Tata Sons chairman runs until February 2027. The eventual outcome, however, will depend on the company’s Articles of Association and the provisions of the Companies Act.
“Under the Companies Act, 2013, where a director retiring by rotation is not reappointed and the meeting does not expressly resolve not to fill the vacancy, the law contains a mechanism under Section 152(7) whereby the retiring director is generally deemed to have been reappointed, subject to specified statutory exceptions. Equally, if the AGM is adjourned for want of quorum, the office does not automatically become vacant merely because the meeting could not transact business on the scheduled date,” Tushar Kumar, advocate, Supreme Court of India, said.
Based on these provisions, legal experts said Chandrasekaran’s position as chairman until next February may not immediately be affected even if the AGM is unable to consider or vote on the resolution for his reappointment as a director. They cautioned, however, that the final legal position would depend on how the Companies Act and Tata Sons’ Articles of Association apply to the circumstances. Reappointment as a director is among the key items on the agenda for the August 18 meeting, according to the notice issued by Tata Sons.
Legal experts, however, noted that Indian company law does not recognise a precedent for a person continuing as chairman after ceasing to be a director. Since the office of chairman ordinarily flows from board membership, any lawful cessation of directorship would ordinarily also bring the chairmanship to an end.
SRTT Restraint
The uncertainty over the validity of the AGM stems from a directive issued by the Charity Commissioner restraining the Sir Ratan Tata Trust (SRTT) from convening meetings of its trustees until further orders.
“The Charity Commissioner’s reported directive is that SRTT cannot convene trustee meetings until further orders. On its face, the directive does not prohibit SRTT from participating in the Tata Sons AGM. However, it may create difficulty in SRTT taking the internal steps required to authorise participation or nominate a representative, if such requirement exists under Tata Sons’ Articles of Association,” Mathuvanthy Mathavan, partner, Poovayya & Co. offered.
The issue assumes significance because, if the Articles require a representative jointly nominated by the Sir Dorabji Tata Trust (SDTT) and the Sir Ratan Tata Trust (SRTT) to be present for a valid quorum, SRTT’s inability to participate in that nomination process could prevent the AGM from being validly constituted.
“If SRTT cannot validly join SDTT in nominating that representative, this quorum condition is not met. In that case the AGM cannot transact business and must be adjourned in line with the Articles,” Alay Razvi, managing partner, Accord Juris said.
Legal experts stressed that the issue is one of constitutional validity rather than voting strength.
“Quorum and majority serve distinct juridical purposes. The former concerns the lawful constitution of the meeting; the latter concerns the determination of business at a meeting already duly constituted. A voting majority cannot cure an antecedent defect in quorum or otherwise confer legal efficacy upon proceedings conducted otherwise than in accordance with the company’s Articles,” Yash B. Joglekar, advocate, Bombay High Court added.