An intense boardroom battle is brewing at India's giant Tata Group

An intense boardroom dispute is brewing for control of Tata Group, the Indian multinational conglomerate that owns Jaguar Land Rover and Air India, and is a key supplier for Apple.

On Thursday, Noel Tata, the heir of the Tata family and the chair of Tata Trusts, said that the reappointment of N. Chandrasekaran as the chairman of Tata Sons earlier in the day was "illegal."

Noel Tata wants to keep Tata Sons private to safeguard its current ownership, experts said, while Chandrasekaran wants to grow the business by making large, bold bets that require massive capital.

If the dispute lasts beyond six months, as happened 10 years ago, it may delay the prospective listing of Tata Sons — a crucial part of Chandrasekaran's strategy to get the funding he needs.

"The deadlock could slow down capital-intensive bets in Air India, semiconductors and batteries where leadership continuity and trust are as important as balance sheets," Jaydeep Mukherjee, professor of Economics at Great Lakes, Chennai, told CNBC. "Tata needs to split operational leadership from shareholder-trust politics."

Tata Group has made some big capital commitments under Chandrasekaran's leadership, which in the latest letter to shareholders he described as the building blocks for India's road to becoming a developed country by 2047.

These include the purchase of beleaguered national carrier Air India in 2022 and follow-up investments for its turnaround, plans to set up a $11 billion semiconductor plant and bets on low-margin electronic assembly work for Apple.

Tata Sons needs over 290 billion rupees ($3 billion) annually to support its loss-making businesses such as Air India, Tata Digital, Tata Electronics, and another 900 billion rupees to invest in the new semiconductor plant, Deven Choksey, managing director of Mumbai-based DRChoksey Finserv, told CNBC.

But it earns little over 300 billion rupees in dividends, he said, leaving a large funding gap. Listing the company might be one way to rectify that — Tata Sons could fetch a gross valuation of over 12 trillion rupees, Choksey said.

Tata Sons is the holding company of Tata Group companies, but the ultimate ownership lies with the Tata Trusts. Tata Trusts is the largest shareholder in Tata Sons with a 66% share, followed by 18% owned by Shapoorji Pallonji Group and 13% owned by Tata Group companies, Jefferies said in a report in August.

Last month, Chandrasekaran had expressed his displeasure over the delay in finalizing his reappointment and announced that he would not seek another term. The decision was accepted by the Tata Trusts, and it advised Tata Sons to initiate the process for setting up a selection committee for appointing a successor.

On Thursday, however, Tata Sons said in a release that its board, with a "majority vote," approved the re-appointment of Chandrasekaran for another five years after his term expires in February next year.

While four directors on the Tata Sons board approved the decision, Noel Tata voted against the re-appointment, the Tata Trusts said in a separate release the same day. The chairman of Tata Sons cannot be appointed without the approval of the chair of the Tata Trust, so the decision was a "legal nullity," it added.

Tata Trusts has resisted demands from Indian regulators to list Tata Sons and said on Thursday it will "explore all avenues and possibilities to move out of the regulatory framework that requires mandatory listing."

"If Tata Sons is publicly listed, the rights of Tata Trusts as majority shareholders stand to be seriously impaired," the Tata Trusts said in a release.

But Tata Sons likely cannot escape listing if it needs funds to support its large capital investment plans.

During the financial year ended in March, Tata Sons' consolidated net profit slipped 35% to 266 billion rupees (about $2.78 billion) as losses from Air India, Tata Digital and Tata Electronics piled up, as per Tata Sons' latest annual report.

While all these loss-incurring businesses are unlisted, the market capitalization of Tata Group's listed companies dropped 12% during the same period.

The decision to take bold bets, risking losses at a time when the group's top money-spinning company, Tata Consultancy Services, grapples with the impact of artificial intelligence on the information technology sector has deepened the rift between Chandrasekaran and Noel Tata.

Tata Sons does not have "access to capital markets or debt markets right now" to raise funds for its unlisted ventures that generate losses, Shriram Subramanian, founder and managing director of proxy advisory firm InGovern Research Services, told CNBC.

The moment Tata Sons raises funds through debt, it will be qualified as a non-banking financial company, which would require it to be listed under the Reserve Bank of India's Upper NBFC mandatory listing regulations, he added.

Last week, the Reserve Bank of India rejected Tata Sons' application from 2024 to surrender its registration as a Core Investment Company, dashing hopes that the company could avoid the mandatory listing, Tata Trusts said.

The listing could pose a challenge to the Tata Trusts' ownership of Tata Sons, and thus to Noel Tata's sway over the company.

The Tata Trusts has legitimate concerns that the listing of Tata Sons could provide an entry to a new strategic minority investor who would buy the 18% stake owned by Shapoorji Pallonji, said Choksey, adding that this could weaken their hold on the century-old family business.

To protect the ownership of the business, Tata Trusts on Thursday proposed to acquire the stake from S.P. Group for 250 billion rupees over 18 months. It suggested that Tata Sons could fund this acquisition through internal cash flows, sale of listed shares, or by bringing an investor into some of the newer businesses, rather than listing. 

The dividend that Tata Sons earns from its companies is not enough to "pay for the losses and fund for expansion," Choksey said, while monetizing loss-making assets like Air India or Tata Digital is next to impossible in India right now.