Noel Tata vs N Chandra: Trusts chief demands tape of Tata Sons board meeting

Tata Trusts Chairman Noel Tata, on September 30, wrote to the Tata Sons board seeking the video recording and minutes of the September 17 board meeting that reappointed N Chandrasekaran as chairman, according to people aware of the matter.

In his letter, Noel Tata has said he was not given an adequate opportunity at the meeting to present a legal opinion he had obtained from former Chief Justice of India DY Chandrachud. He has also claimed that the reappointment resolution was passed as a debrief from the board's nomination and remuneration committee and has questioned the legal opinions relied on to validate the reappointment.

What happened on September 17

The Tata Sons board approved Chandrasekaran's third term by a 4-1 vote. Chandrasekaran did not vote. Noel Tata voted against the resolution, while Venu Srinivasan, the other Tata Trusts nominee on the board, voted in favour.
With the 2 Trusts nominees split, the decision then went to Harish Manwani, chairman of the board's nomination and remuneration committee, sources had told CNBC-TV18.

That split is at the heart of the dispute. Under Tata Sons' Articles of Association, decisions that need a board majority must also carry the affirmative vote of a majority of the Trusts' nominee directors. With 1 nominee voting each way, Tata Trusts argues the required majority was never met and the resolution is invalid. Tata Sons maintains that a 1-1 split among the nominees is a tie, which can be broken by a casting vote, and has defended the resolution as legally valid.

What Chandrachud's opinion says

The Chandrachud opinion is dated May and was not sought specifically for the September meeting, people aware of the matter said. It deals with the board's process for appointing a chairperson under the company's articles.

According to the opinion seen by CNBC-TV18, affirmative voting rights in a company's articles are central to establishing control and safeguarding the interests of the parties. Where the articles require a resolution to have the support of a specified majority of a particular group of directors, the chairperson's casting vote cannot supply that missing vote.

Chandrachud has also said that a casting vote applies only when there is a tie among the board as a whole, not between 2 specific directors, and that it is a well-settled principle that a casting vote cannot be used to create a majority where none exists.

On reappointment, the opinion says that even if an incumbent is reappointed as chairperson, the new term would be a fresh chairmanship and not a continuation of the existing one. If the process under Article 118 is not followed, the board could repeatedly reappoint the incumbent, effectively circumventing the rights of those who sought the opinion, it adds.

What comes next

Noel Tata's request for the video and minutes is the latest step in a fight that has been escalating since the vote. According to sources, Tata Sons wrote to him on September 24 defending the resolution as valid under the articles. The Trusts have called the reappointment void.

If the records show how the casting vote was used, they could become central to any legal challenge. Tata Trusts has the option of moving the NCLT or the Bombay High Court against the September 17 resolution. Whether a chairman's casting vote can override the Trusts' affirmative voting rights is yet to be tested in court.

Rift within the Trusts

Meanwhile, Venu Srinivasan and Vijay Singh, both vice chairmen of the Sir Dorabji Tata Trust (SDTT), have written questioning the Trusts' recent restructuring proposal to Tata Sons. In a September 29 letter, seen by CNBC-TV18, they said no meeting of SDTT trustees was held before the proposal was sent to Tata Sons and that it was unclear whether it had the support of all trustees.

The 2 have also separately approached the Maharashtra Charity Commissioner. Srinivasan has sought an inquiry into SDTT's governance and questioned Noel Tata's status as a perpetual trustee, while Singh has said he raised similar concerns. Noel Tata and his son Neville have since filed caveats with the Commissioner.

SDTT and the Sir Ratan Tata Trust (SRTT) are Tata Sons' 2 largest shareholders. With SRTT barred by the Maharashtra Charity Commissioner from convening trustee meetings, SDTT is now effectively the Trusts' only lever over Tata Sons. That makes the fight inside SDTT, where Srinivasan and Singh are now challenging Noel Tata, as important as the one in the Tata Sons boardroom.

Also Read: Delhi registers most polluted start to October in four years