Tata Trusts on Sunday challenged the use of a casting vote to validate N Chandrasekaran’s reappointment as Tata Sons chairman, saying the September 17 board resolution lacked mandatory support from its nominee directors. In the statement, the Trusts, which own about 66% of Tata Sons, said its Articles of Association require affirmative support from a majority of Trust-nominated directors. With two nominees, both must agree, it argued. “Majority amongst two is two and not one,” the statement said.
It described the resolution as “void ab initio”, Latin for “invalid from the outset”.
Casting vote dispute
The Trusts, which hold approximately 66% of Tata Sons, said the company’s Articles of Association require affirmative support from a majority of their nominee directors before a board decision can be taken. This requirement operates separately from the overall board vote, according to the statement.
There are two Trusts nominees on the board and one voted against the resolution, the statement said. “Majority amongst two is two and not one,” it added, arguing that the necessary condition had therefore not been met.
“The Chairman’s casting vote is available only where there is equality of votes at the overall board level. It does not apply amongst Tata Trusts’ Nominee Directors,” the statement said.
The Trusts argued that the overall voting tally, whether 4:1 or any other figure, was irrelevant if the requirement for nominee directors’ support remained unmet.
Rejecting suggestions that withholding support created a deadlock that could paralyse the company, the Trusts said, “There was no paralysis and there was no deadlock.” The refusal represented the exercise of a protective right under the company’s constitution, they argued.
Mistry case cited
The statement also invoked the litigation arising from Cyrus Mistry’s removal, saying Tata Sons had defended the same affirmative voting rights before the Supreme Court.
According to the Trusts, the rights under Articles 104B and 121 had been held oppressive by the National Company Law Appellate Tribunal. Tata Sons resisted demands to delete or restrict them, defending the provisions as shareholder protections and an entitlement of the majority shareholder, the statement said.
The Supreme Court accepted the company’s case and set aside the finding that the articles were oppressive, the Trusts said. “The Company cannot now disown the protection it went to the Supreme Court to preserve,” the statement added.
Listing and governance
The Trusts also rejected the argument that listing Tata Sons would address shortcomings in corporate governance. “That argument assumes a governance gap which does not exist,” they said.
Tata Sons had voluntarily adopted public company governance standards long before the current dispute, according to the statement. These included independent directors, audit and nomination and remuneration committees, provisions for related party transactions, retirement of directors by rotation and an insider trading prevention code.
The Trusts said these measures were recorded in the company’s annual reports and corporate governance reports.
Linking their position to their philanthropic role, the Trusts argued that the issue extended beyond which governance framework Tata Sons followed. It concerned representation for the millions of underserved and excluded Indians who, the statement said, had been central to their work for more than 130 years.