Tata Sons rejects Noel Tata's objections, hold Chandrasekaran's reappointment valid

The Tata Sons boardroom battle has moved from a family-and-governance dispute to a full-fledged legal contest, with the company telling Tata Trusts chairman Noel Tata that N Chandrasekaran’s reappointment as chairman was valid and in line with its internal rules.

In its first formal response to Noel Tata’s objections, Tata Sons said its board had acted lawfully when it approved Chandrasekaran’s reappointment for another five-year term, two people with direct knowledge of the letter told Reuters.

The company also cited three legal opinions, including those from lawyers and former Supreme Court judges, in support of its position, the sources said.

The response follows a week of public statements and interviews from both sides as the dispute over Chandrasekaran’s reappointment has escalated into the biggest governance crisis to hit the 158-year-old Tata group in years.

The Tata Sons board has approved Chandrasekaran’s reappointment despite opposition from Noel Tata, who heads the Tata Trusts, which collectively own about 66% of Tata Sons. Tata Trusts has argued that the appointment required majority support from its nominee directors.

Tata Sons, however, has rejected that interpretation of its Articles of Association (AoA).

In the September 24 letter to Noel Tata, the company said the board had "validly resolved to reappoint Mr N Chandrasekaran as the chairman upon the expiry of his existing tenure" in accordance with applicable law and the company’s Articles of Association.

The company told Noel Tata that the directors had acted in accordance with their responsibilities to Tata Sons when they approved the appointment, the Reuters sources said.

The legal opinions cited by Tata Sons are now central to its defence of the board decision, as the two sides offer competing interpretations of the company’s governance rules.

Noel Tata’s position is that the reappointment was not valid without the required support of the Tata Trusts nominees. Tata Trusts has been seeking to establish whether the board followed the special voting provisions in Tata Sons’ Articles.

The dispute has also split the Tata Trusts’ representatives on the board. Reuters has reported that Noel Tata opposed Chandrasekaran’s continuation, while fellow Trusts nominee Venu Srinivasan supported it.

That leaves the Tata group with an unusual corporate paradox: the shareholder controlling about two-thirds of Tata Sons is questioning a decision taken by the company’s board, while the board is insisting that the decision is legally sound.

"Tata Trusts' legal team is vetting the company response," one of the sources told Reuters. Neither Tata Sons nor Tata Trusts immediately responded to Reuters’ requests for comment outside business hours.

The dispute is not limited to Chandrasekaran’s future. It has become intertwined with a larger fight over Tata Sons’ governance and its proposed listing.

Tata Sons is moving towards a public listing, a step opposed by Tata Trusts. The Reserve Bank of India has also rejected Tata Sons’ application to surrender its registration as a non-bank financial company, adding regulatory pressure to the group’s internal battle.- EndsWith agency inputs