The government is closely watching the escalating differences within the Tata group and is “perturbed” that disagreements over governance and leadership are increasingly playing out in public, although it has no plans to intervene.
“We are watching closely and hope good sense will prevail by dialling down the public display of animosity,” a senior government functionary said, adding there are no immediate plans to intervene in the dispute. For the government, the dilemma is evident.
It has no desire to become an arbiter of an internal corporate dispute, but the Tata group is no ordinary corporate house. Its investments span aviation, defence, electronics, semiconductors and other sectors closely linked to national economic priorities. Prolonged uncertainty at the apex of the group therefore carries implications beyond Bombay House.
New Delhi reportedly recently sought — and received — assurances from the group that its $14-billion semiconductor and electronics investments would proceed as planned despite the leadership dispute at Tata Sons.
The projects are central to the government’s attempt to build a domestic manufacturing base in industries dominated by China, Taiwan and South Korea.
This is also not the first time the government has taken note of tensions at the group. In October last year, top Tata leaders reportedly met Home Minister Amit Shah at his residence amid serious differences within Tata Trusts, which owns about 66% of Tata Sons. The government’s message then was that the differences should be resolved quickly and stability restored.
Instead, the fault lines have widened. What began largely as differences within Tata Trusts has developed into a broader tussle involving the Trusts and Tata Sons over governance, the future structure of the holding company and its leadership.
The latest flashpoint is the Tata Sons board meeting where the board reappointed N Chandrasekaran as Tata Sons chairman despite objections from Tata Trusts Chairman Noel Tata who has now sought the video footage and minutes of the September 17 meeting at which the reappointment was approved, seeking clarity over the proceedings and the basis on which the resolution was passed.
Competing legal opinions have since been cited over the interpretation of Tata Sons’ Articles of Association and the voting rights of Trust-nominated directors.
At the same time, differences have sharpened within Tata Trusts itself. A proposal to restructure Tata Sons by merging two subsidiaries with the holding company — aimed at helping Tata Sons remain unlisted while addressing regulatory requirements — has been questioned by trustees Venu Srinivasan and Vijay Singh. They have raised concerns over the process by which the proposal was communicated to Tata Sons and whether other trustees had been adequately consulted.
Regulatory complications are adding to the uncertainty. The Sir Ratan Tata Trust remains under directions from Maharashtra’s charity commissioner restraining it from holding board meetings, a situation that contributed to the unprecedented adjournment of the Tata Sons annual general meeting on August 18.
Scrutiny could now extend to the Sir Dorabji Tata Trust, the single largest shareholder in Tata Sons. Srinivasan and Singh have approached the charity authority seeking an investigation into Noel Tata’s actions and alleged governance irregularities at the trust.