Tata Sons Defends N Chandrasekaran Reappointment, Cites Legal Advice Amid Tata Trusts Row

Tata Sons has defended its board’s decision to reappoint N. Chandrasekaran as chairman for five years, amid a dispute with Tata Trusts over whether the move complied with the company’s articles. In a 24 September letter to Tata Trusts chairman Noel Tata, Tata Sons stated that the decision followed relevant laws and company rules. The company wrote that letter after the board meeting on 17 September.

Tata Sons group company secretary Suprakash Mukhopadhyay signed the letter. The company said it had taken legal advice from lawyer Sudipto Sarkar before the 17 September board meeting and later received separate opinions from former Chief Justice of India U.U. Lalit and former Supreme Court judge B.N. Srikrishna.

“The board, by a majority resolution, validly resolved to reappoint Mr N. Chandrasekaran as the chairman upon the expiry of his existing tenure,” Tata Sons stated in the letter, according to an executive who saw it. Mukhopadhyay’s letter answered two letters dated 18 September from Noel Tata, who had questioned the legality of Chandrasekaran’s reappointment. The dispute follows the 17 September board meeting, when Tata Sons’ board went against Tata Trusts, its main shareholder, in a rare case in corporate India where a company board disagreed with its controlling shareholder.

Board Vote Dispute

Tata Trusts nominees Noel Tata and Venu Srinivasan cast opposing votes on Chandrasekaran’s reappointment. Harish Manwani, who led the process, then used the deciding vote in favour of the reappointment, defeating Noel Tata.

Tata Trusts has disputed that reading. It said Article 121 of Tata Sons’ rules requires a majority of Trustees to clear a chairman’s reappointment, and that no deadlock arose when its two trustees voted differently on the proposal.

“A casting vote cannot revive a stillborn resolution,” Tata Trusts stated. Tata Sons, in response, explained that an independent director’s decision to break the tie on the reappointment followed legal advice from three legal experts.

Legal Opinions Cited

Tata Sons later got separate opinions from former Chief Justice of India U.U. Lalit and former Supreme Court judge B.N. Srikrishna. Its 24 September response also carried an 11-page opinion from Justice Lalit and an eight-page note from Srikrishna, according to an executive familiar with the matter.

The board had first obtained an opinion from Kolkata-based lawyer Sudipto Sarkar on 16 September, a day before the board meeting, according to a second executive. “On a plain reading of Article 121, it can be said that the chairman’s casting vote can be invoked in either of the following situations: (i) where there is an equality of votes amongst the directors appointed pursuant to Article 104B; and (ii) where there is an equality of votes of the board as a whole after taking into account the votes cast by all directors,” Sarkar wrote, according to the second executive.

Srikrishna backed that reading in an opinion sent earlier this week to the Tata Sons board, the second executive said. “In my opinion, what has been done is perfectly consonant with the letter and spirit of Article 121,” Srikrishna said. Lalit’s opinion took the same line. “Since there was equality of votes among the directors’ appointment pursuant to Article 104(B), the presiding or the officiating chairman, by putting his casting vote, satisfied the requirement under Article 121,” Lalit said, according to the second executive.

Noel Tata Objections

Noel Tata has rejected that interpretation.

In two letters dated 18 September, written after last Thursday’s board meeting, Noel Tata questioned the legality of Chandrasekaran’s reappointment and argued that the entire process was invalid from the start.

Noel Tata said the 2022 move to bring back Chandrasekaran followed Article 118, which covers the selection of the chairman. He also said the chairman could not be reappointed because he had voted against the resolution.

He described the resolution under Article 121 as a “dead resolution,” maintaining that the reappointment was illegal from the beginning.