Maharashtra charity body may examine Tata Trust share transfer validity

Mumbai: The Maharashtra Charity Commissioner is likely to examine an external legal opinion questioning the validity of the 1989 transfer of 833 Tata Sons shares from the Navajbai Ratan Tata Trust to former trustee Naval H Tata.The legal opinion, authored by former Supreme Court judge and former National Company Law Appellate Tribunal (NCLAT) chairperson Justice (Retd.) S J Mukhopadhaya, concludes that the transfer was "void ab initio", or invalid from inception, alleging violations of the Companies Act, 1956, Tata Sons' Articles of Association and the fiduciary obligations of the trustees.

The 27-page opinion, dated July 23, was sought by advocate Katyayani Agrawal on behalf of the Sir Ratan Tata Trust and has since been placed before the Maharashtra Charity Commissioner for consideration.

The legal opinion represents counsel's assessment of the transaction and does not, by itself, constitute a judicial finding on the validity of the 1989 transfer.


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According to the opinion reviewed by ET, the 833 ordinary shares were transferred to Naval Tata within a week of his resignation as a trustee in January 1989. The transaction allegedly did not include any attempt to determine or secure the fair value of the shares, while the share register recorded "nil" consideration.

Justice Mukhopadhaya held that the transfer amounted to a related-party transaction and was contrary to the charitable objectives of the trust and detrimental to its beneficiaries. The opinion also finds that the transaction did not comply with requirements under Section 108 of the Companies Act, 1956, relating to the transfer of shares, as well as relevant provisions of Tata Sons' Articles of Association.

The opinion examines Articles 58, 59 and 60 of Tata Sons' Articles, which, according to the legal view, required the fair value of shares to be determined and prescribed procedures to be followed for such transfers.

The legal opinion concludes that the alleged defects were not merely procedural irregularities but rendered the transaction a legal nullity that could not be cured.

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It also flags the potential applicability of Section 237 of the Companies Act, 1956, which provides for an investigation into the affairs of a company in specified circumstances.

Justice Mukhopadhaya concluded that the transfer of the 833 shares without attempting to secure fair value was contrary to the Companies Act and Tata Sons' Articles of Association and was therefore void ab initio.

Second, it concludes that transferring trust assets to a former trustee, in his individual capacity and without securing fair consideration, was contrary to the public charitable objects of the Navajbai Ratan Tata Trust, detrimental to its beneficiaries and constituted a breach of fiduciary duty. The external legal opinion has been received by the Maharashtra Charity Commissioner's office and is currently under review, Maharashtra government officials familiar with the matter told ET.

The Charity Commissioner was not immediately available for comment.

A key issue before the authorities is the nature of the asset involved. Since shares constitute movable property, the transfer and ownership would have to be examined in the context of the provisions and rules governing public trusts in Maharashtra, the sources said. "Under the Act, the transfer of ownership requires valid creation either through a clear written declaration or the actual transfer of share ownership, whether through demat or physical transfer, into the name of the trustee. The matter is under review," a government official said, requesting anonymity.