Tata Trusts on Thursday said in statement that the Tata Sons board’s decision to reappoint N Chandrasekaran as executive chairman for another five years is “illegal”, arguing that the resolution did not comply with the company’s Articles of Association.
Noel Tata, who is chairman of Tata Trusts, said the same in his statement at the board meeting and called the move “premature.”
In its statement, Tata Trusts – which is the largest shareholder in Tata Sons with a 66 per cent holding – emphasised that Chandrasekaran had decided that he would not to seek another term after his current tenure ends on February 20, 2027, and that the Trusts had accepted the decision in August.
However, on Thursday, the Tata Sons board approved Chandrasekaran’s reappointment for five years after he agreed to reconsider his earlier decision. The resolution was approved with four directors voting in favour, and Noel Tata dissenting.
Tata Trusts cite Articles of Association
The Trusts said the Articles of Association require a majority of the Trusts’ nominee directors to vote in favour of the appointment of the Tata Sons chairman.
The same requirement, according to the Trusts, applies to both the first appointment of a chairman and the reappointment of an existing chairman.
“The Board, accordingly, cannot lawfully hold a meeting or pass a resolution on the Chairman’s appointment or reappointment unless both nominee directors are present, and cannot validly pass such a resolution unless both nominee directors vote in favour,” the Trusts said in the statement.
It said that since Noel Tata, one of the Trusts’ nominee directors, voted against the proposal, the resolution was “a legal nullity” under the provisions of the Articles of Association.
Legal opinion submitted to Tata Sons board
The Trusts also said Noel Tata submitted a legal opinion obtained from former Chief Justice of India DY Chandrachud on the correctness of the Trusts’ position.
“The same was not taken note of by the Board,” the Trusts said.
The Trusts did not disclose the contents of the legal opinion in the statement.
Trusts say Chandra’s decision had attained ‘finality’
The Trusts said Chandrasekaran’s decision to not to seek reappointment, conveyed through a letter on August 12, had been freely taken and communicated to the Tata Sons board.
It said the decision was subsequently made public and had been acted upon by employees, lenders, counterparties, the market and the majority shareholder.
“Once such a decision has been publicly communicated, it has consequences which cannot be afterwards undone,” the Trusts said.
The Trusts said they formally accepted Chandrasekaran’s decision the following day and asked Tata Sons to begin the process of setting up a selection committee to appoint his successor under the Articles of Association.
Leadership transition
The Trusts said their position remained unchanged and that they remained committed to an “orderly and timely leadership transition” at Tata Sons and the Tata Group.
During the board meeting, Tata Sons also approved steps towards complying with Reserve Bank of India (RBI) requirements for the company’s listing. Both the listing proposal and Chandrasekaran’s reappointment received one opposing vote, with Noel Tata opposing both.
