Tata Trusts step up battle as legal heavyweights join

The Trusts, which hold about 66% of Tata Sons, said the AoA require the affirmative support of at least a majority of directors nominated by them before a board decision can take effect. With two Trust-nominated directors currently on the Tata Sons board, the Trusts argued that both had to support the resolution.

At the September 17 meeting, Tata Trusts chairman Noel Tata opposed Chandrasekaran’s reappointment, while the other Trust-nominated director, Venu Srinivasan, supported it. The Tata Sons board backed a further five-year term for Chandrasekaran, beginning February 21, 2027. Tata Trusts said the split between its two nominees meant the affirmative-vote condition prescribed by the AoA was not satisfied.

“Whether the result of the vote was 4:1, or any other figure, is irrelevant. A condition is either met, or it is not. In this case the condition was not met,” the Trusts said.

It also rejected the contention that a casting vote could cure the deficiency. According to the Trusts, a chairman’s casting vote is available only where there is an equality of votes at the overall board level and cannot be used to establish the required majority among Tata Trusts-nominated directors.

The Trusts consequently maintained that the resolution reappointing Chandrasekaran “was not validly passed and has no legal effect” and was “void ab initio”.

Sunday’s intervention marked a further escalation of the dispute between Tata Trusts and Tata Sons over both Chandrasekaran’s continuation and the possible listing of the holding company. Mint reported that it was the sixth statement issued by Tata Trusts since Thursday.

The sharpening differences have also prompted both camps to assemble formidable legal teams, signalling preparations for the possibility that the dispute could eventually move to court.

According to a Bloomberg report, Cyril Amarchand Mangaldas has been advising Noel Tata and Tata Trusts for more than a year, with managing partner Cyril Shroff personally handling the matter along with senior partners including Indranil Deshmukh. The team also includes Bharat Vasani, who was Tata Sons’ group general counsel for more than 17 years before retiring in 2017.

Tata Trusts and Noel Tata have also recently retained senior advocates Aspi Chinoy, Janak Dwarkadas, Abhishek Manu Singhvi and Mukul Rohatgi, the report said. Singhvi has publicly confirmed his role.

On the other side, Tata Sons and Chandrasekaran are being advised by Anagram Partners, led by Shuva Mandal, another former Tata Sons group general counsel. Mandal had earlier advised Tata Sons during the 2016 removal of Cyrus Mistry as chairman and subsequently helped steer the group through the litigation that culminated in the Supreme Court’s 2021 judgment in Tata Sons’ favour. Senior advocates Harish Salve and Ravi Kadam have also been retained on the Tata Sons side.

The legal teams themselves underline an unusual aspect of the confrontation: lawyers with deep familiarity with Tata Sons and its earlier governance battles are now ranged across the two sides.

Singhvi, who described himself as the lead lawyer for one side, said in a post on X on Sunday that he was entering the dispute with “sadness and regret” that the issues could not be resolved amicably. He said the “fundamental rights of shareholder-owners cannot be nullified” in the manner alleged by Tata Trusts and argued that disrupting the century-old relationship between Tata Trusts and Tata Sons was “unthinkable”.

Singhvi also invoked the earlier Tata-Mistry litigation, arguing that the Supreme Court judgment had upheld the special provisions in Tata Sons’ Articles relating to the Trusts. In his formulation, attempts to constrain shareholder rights, intra-Trust decision-making and the established voting arrangements raised questions that, in the absence of an agreed settlement, would have to find legal resolution.

Salve, meanwhile, has publicly acknowledged advising Tata Sons and Chandrasekaran and has defended their position. In recent interviews, he argued that a company cannot operate in a state of deadlock and that Tata Sons directors owe their duties to the company and its stakeholders rather than acting merely as representatives of the controlling shareholder.

Salve has also backed a public listing, arguing that greater transparency and institutional oversight would benefit an organisation of Tata’s scale. On the regulatory issue, he said the Reserve Bank of India’s position required Tata Sons to comply with the rules applicable to core investment companies and described the company’s legal position as “legally perfect”.

The Trusts’ Sunday statement sought to turn Tata Sons’ own arguments in the Cyrus Mistry litigation against it.

During the proceedings arising from Mistry’s removal, the affirmative voting rights of Trust-nominated directors under Articles 104B and 121 were directly challenged. The National Company Law Appellate Tribunal had found the provisions oppressive, while Tata Sons defended them before the Supreme Court as legitimate protections agreed between shareholders and as reflecting the entitlement of Tata Trusts as majority shareholder.

The Supreme Court subsequently set aside the appellate tribunal’s findings in 2021. Tata Trusts now argues that Tata Sons cannot take a position inconsistent with the protections it had then defended.

“The Company cannot now disown the protection it went to the Supreme Court to preserve,” the Trusts said. “They are either in the Articles or they are not.”

The Trusts also rejected the suggestion that the lack of support from one of its nominees amounted to a governance deadlock capable of paralysing Tata Sons. In its view, the board had put a question to vote and the company’s Articles had supplied the answer.

“The exercise of a protective right conferred by a company’s own constitution is not a deadlock; it is that constitution working as it was written to work,” the statement said.

The dispute also extends to the proposed listing of Tata Sons. The Tata Sons board has favoured moving towards a public listing after the RBI rejected the company’s application to surrender its registration as an upper-layer non-banking financial company, while Tata Trusts has opposed treating a listing as inevitable and has called for alternatives to be examined.

The Trusts on Sunday pushed back against the argument that listing Tata Sons would necessarily result in better corporate governance. It said Tata Sons had already voluntarily adopted several standards associated with listed companies, including independent directors, an audit committee, a nomination and remuneration committee, rules governing related-party transactions and retirement of directors by rotation.

It also pointed to provisions governing insider trading and said these governance standards had been adopted well before the present dispute and were reflected in the company’s annual and corporate governance reports.

With the opposing camps now publicly advancing sharply different interpretations of Tata Sons’ Articles — and some of India’s most prominent corporate lawyers and senior advocates advising them — the dispute over the September 17 decisions appears increasingly set to move from the boardroom into the legal arena.