The Tata Trusts have rejected the contention that a deadlock arose at the Tata Sons board meeting on 17 September, arguing that the company’s Articles of Association (AoA) clearly set out the conditions governing the reappointment of N. Chandrasekaran as chairman.
According to the Trusts, decisions of the Tata Sons board are not determined solely by the overall headcount of directors. The AoA require the affirmative support of at least a majority of directors nominated by the Tata Trusts, which collectively hold approximately 66 per cent of Tata Sons. The Trusts said this constitutes a separate condition that must be satisfied for a decision to be valid.
There are two Tata Trusts nominee directors on the Tata Sons board. The Trusts maintain that, with two nominees, both would need to support the resolution for the required majority to be established. At the 17 September meeting, one of the two nominees voted against the resolution concerning Chandrasekaran’s reappointment. The Trusts therefore contend that the required affirmative support was not secured. In their interpretation of the AoA, the failure to satisfy this condition meant that the resolution itself failed, irrespective of the overall tally of votes.
They have also disputed the applicability of the chairman’s casting vote. According to the Trusts, such a vote can be exercised only when there is an equality of votes across the board. It cannot be used to overcome the absence of the separately required affirmative support among Tata Trusts’ nominee directors. The Trusts said that, on this interpretation, the precise overall vote count, whether 4:1 or otherwise, is not material because the separate condition under the AoA was not met.
The statement rejected the suggestion that the nominee director’s opposition created a deadlock capable of paralysing Tata Sons and requiring intervention through a casting vote. The Trusts argued that there was no deadlock because the board had put a question to a vote and the AoA provided the answer when the required condition was not fulfilled. It described the exercise of the protective rights provided under the company’s constitution as the AoA operating as intended, rather than as a situation resulting in board paralysis.
The Trusts consequently maintain that the resolution to reappoint Chandrasekaran was not validly passed at the 17 September meeting and has no legal effect. They describe the resolution as void from the outset.
The statement also drew on Tata Sons’ earlier legal position concerning the same provisions of its AoA. The Trusts said Tata Sons had defended the affirmative voting rights of their nominee directors under Articles 104B and 121 during the litigation surrounding the removal of former Tata Sons chairman Cyrus Mistry. The National Company Law Appellate Tribunal had held the provisions to be oppressive, while the complainants had sought their deletion or restriction. Tata Sons opposed that position and defended the provisions as legitimate protections agreed between shareholders and as rights attached to the Trusts’ position as the majority shareholder.
The Supreme Court subsequently accepted Tata Sons’ case and set aside the finding that the provisions were oppressive. The Trusts now argue that Tata Sons cannot reject the same protections that it had previously defended before the Supreme Court. The statement said the provisions must either form part of the AoA or not, and that Tata Sons had already argued before the country’s highest court that they did. The Trusts also criticised the interpretation of the AoA being applied to the current dispute, describing it as inconsistent with the corporate-governance standards associated with Tata Sons.
On the question of listing, the Trusts rejected the argument that bringing Tata Sons under a listed-company framework would necessarily address a governance gap. It said the company had voluntarily adopted several standards applicable to public companies even without being listed. These include provisions relating to independent directors, an audit committee, a nomination and remuneration committee, related-party transactions and retirement of directors by rotation. Tata Sons also has a code of conduct relating to the prevention of insider trading.
According to the Trusts, these measures are documented in Tata Sons’ annual reports and corporate-governance reports and were adopted voluntarily in the interests of transparency and governance, well before the current dispute. The Trusts therefore argued that listing is not necessary to introduce governance standards that Tata Sons has already chosen to follow. It described any attempt to dismantle a structure built over more than a century to address an alleged governance gap as “taking a sledgehammer to crack a nut”.
The statement concluded by framing the dispute as a broader question of representation. The Trusts said the issue was not simply which governance framework is better suited to Tata Sons, but who remains in a position to represent the interests of millions of underserved and excluded Indians, whom the Trusts said have been central to their work for more than 130 years.
