The Indian company Tata Sons, which owns well-known brands such as Jaguar Land Rover and Tetley tea, has encountered one of the most serious disputes in its board of directors. The company's management is openly opposing its largest shareholder regarding key decisions.
Tata Trusts, the group's charitable arm, holds 66% of Tata Sons' shares. However, the company's board appointed N. Chandrasekaran as chairman and decided to proceed with a possible stock market listing against the wishes of its owner, making the power struggle the central theme of this confrontation.
Experts familiar with the situation explain the positions of both sides, as well as the complex structures and legal options under consideration.
Legal Stance of Tata Trusts and Tata Sons
Both parties have engaged leading national lawyers to defend their interests and determine authority. Noel Tata-led Tata Trusts is represented by lawyer Abhishek Manu Singhvi, who stated that the dispute concerns shareholder supremacy, and the conglomerate cannot act as an 'unrestrained board of directors' operating independently of the controlling shareholder.
This view is contested by Chandrasekaran from Tata Group, who brought in Harish Salve, a former Solicitor General of India who frequently represented the government at international forums. Salve argues that the board's decision complied with internal governance rules, and the charitable trust needs to overcome the mindset of 'I control the trusts, I control the thinking of this group.'
Why Can't Tata Trusts Convene a Shareholders Meeting and Remove the Chairman?
Tata Trusts faces its own issues that currently diminish its influence. Tata Trusts comprises several affiliated charitable organizations, and they could have used their voting power to convene a shareholders meeting to effectively remove Chandrasekaran.
However, this is not possible because one of the main charitable organizations, Sir Ratan Tata Trust, has been regulatorily prohibited from holding its own meetings due to a dispute over internal appointments. Consequently, according to internal rules, the charitable organizations currently lack the authority to call a Tata Sons shareholders meeting. According to two informed sources, the trusts can either wait for the deadlock to be resolved after the completion of the regulatory investigation or consider taking legal action to lift the restrictions.
What is the Dispute Over the 'Association Charter'?
At the heart of the disagreements lies the governance system called the Tata Sons 'Association Charter.' Both parties—Tata Trusts and Tata Sons—disagree on the interpretation of these rules, which are not publicly available. The charitable arm insists that if Noel Tata opposed the appointment of the chairman, that was sufficient reason not to move forward with it. It believes that such decisions cannot be made without the support of a majority of the two trust representatives on the board. In this case, the charitable arm publicly asserted: 'a majority of two is two, not one.'
Tata Sons' lawyer, Salve, disagrees. He argues that representatives from both trusts voted differently, leading to a decisive vote that helped reappoint the chairman in accordance with governance rules.
Is Tata Trusts Considering Legal Action?
Sources report that the charitable arm is exploring multiple options to remove Chandrasekaran and overturn the board's decision. One option being considered is an appeal to the Mumbai Tribunal with the argument that the board should not have proceeded because the majority—that is, both trust representatives—did not vote for the reappointment of the chairman.
Disagreements also concern the issue of Tata Sons' listing on the stock market: the board agrees with this, but the charitable arm does not. Tata Trusts may approach the Bombay High Court to challenge the Indian regulator's requirement for the company's listing.