Tata Sons plans AGM within a month, may approach NCLT if SRTT freeze blocks quorum

Mumbai: Tata Sons is planning to convene its annual general meeting within the next month to proceed with its business plans and take up pending corporate matters, although the freeze on key stakeholder, the Sir Ratan Tata Trust (SRTT), remains in place, people familiar with the matter said.

The matters include N Chandrasekaran's reappointment as director, which, in turn, has a bearing on one of two issues that have pitted Tata Trusts chairman Noel Tata against the rest of Tata Sons' board.

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Tata Sons is likely to approach the National Company Law Tribunal (NCLT) for directions to convene the AGM, if the required quorum is not available because of the continuing restrictions on SRTT, the people said. The move would provide a legal route for the holding company to proceed with the meeting and transact its pending business.

It would be in accordance with the applicable corporate law framework. The company did not comment.

“Tata Sons will have to move with speed on multiple matters and, therefore, it’s important that an AGM is held at the earliest. The matter has been looked into in detail legally to find the best way to do so,” said an executive.

The company has already received a three-month extension on the AGM from the Registrar of Companies after the one on August 18 was deferred for want of quorum.

The Maharashtra Charity Commissioner did not lift restrictions on SRTT — one of the two trusts that together own a majority stake in Tata Sons — to hold meetings or make decisions. As a result, a jointly appointed nominee by SRTT and the Sir Dorabji Tata Trust (SDTT) could not take part, resulting in the lack of quorum.

Under section 97(1) of the Companies Act, NCLT has the power to direct that an AGM be held and can, in doing so, override the company’s normal quorum requirements. Such a move could allow Tata Sons to proceed without the SRTT-SDTT nominee, experts said.

“However, this would not necessarily settle the underlying dispute. The affected shareholder could challenge the AGM or resolutions passed at it, potentially opening another legal battle over the validity of the meeting and its decisions,” said Vimal Taparia, partner at Morphis Management Services, a boutique firm specialising in IPO and valuation advisory.

Also Read: Noel Tata proposes splitting Tata Sons as alternative to RBI-mandated listing

Chandrasekaran’s term as a director has to be renewed by shareholders. Executives familiar with the company’s articles of association said that if a meeting cannot be constituted because of a lack of quorum, he would continue as director until a valid AGM is held at which his reappointment can be considered.

A Tata Sons board meeting last Thursday saw a conflict erupt over two key matters — the reappointment of N Chandrasekaran as chairman, and listing of the company, both of which were opposed by Noel Tata but backed by other directors.

According to article 86 of the Tata Sons articles of association, no quorum of a general meeting of the holders of ordinary shares will be constituted unless the members personally present are not less than five in number, including at least one authorised representative jointly nominated by SDTT and SRTT so long as the Tata Trusts hold in the aggregate at least 40% of the paid-up ordinary share capital, for the time being.

SDTT owns 27.98% of Tata Sons and SRTT 23.56%, giving the two trusts a combined 51.54% stake. Other Tata philanthropic trusts take overall charitable trust ownership to about 66%.

The company may approach the NCLT under section 97 of the Companies Act, 2013, which applies specifically to annual general meetings and empowers the tribunal to call or direct the calling of an AGM where there has been a default in holding it, said Shafaq Uraizee Sapre, managing partner of law firm Chandhiok & Mahajan.

“Under section 97, the NCLT may direct how the AGM is to be called, held, and conducted, including deeming one member present to constitute the meeting,” said Uraizee. “Under section 97, the NCLT may direct how the AGM is to be called, held, and conducted, including deeming one member present to constitute the meeting,” said Uraizee. “NCLT’s jurisdiction is confined to regulating the conduct of Tata Sons’ AGM under company law. An order under section 97 cannot be characterised as overriding or setting aside the charity commissioner’s order governing SRTT, as those are separate statutory regimes.”

Pursuant to the charity commissioner’s order, SRTT’s board of trustees has been directed to defer its meeting until submission of the inspector’s inquiry report, said Shreni Shetty, head of dispute resolution practice at law firm ANB Legal.

“In such circumstances, it would not be possible for SRTT to make the joint nomination of an authorised representative for the AGM, without which the quorum requirements for validly conducting the meeting of Tata Sons remain unfulfilled,” Shetty said. “In such a scenario, any member of Tata Sons could approach the NCLT under section 97 and seek directions for conducting the AGM.”

The tribunal has broad powers under the NCLT rules to facilitate the shareholders’ meeting, including the express power to deem even one member present in person or by proxy as constituting the meeting, Shetty said.

“However, in my view, it would be extremely unlikely for the NCLT to pass an order overriding the specific quorum rights of a shareholder, which have been expressly agreed and included in the articles,” she added.