ET Exclusive: N Chandrasekaran considers stepping down as Tata Sons chairman ahead of AGM

Mumbai: Tata Sons chairman N Chandrasekaran has discussed with close associates the possibility of stepping down rather than being subject to the outcome of an uncertain, and potentially contentious, annual general body meeting (AGM) scheduled on August 18, multiple people familiar with the developments said.

With less than a week now for the AGM, uncertainty hangs heavy over a number of important questions, including whether the meeting can be held at all. The meeting is critical for Chandrasekaran because while his term as chairman is not due for an extension till February 2027, his continuation till then is contingent upon getting reappointed director on the board of Tata Sons.

Also read: Noel Tata says '89 share transfer in line with the law


With Tata Trusts chairman Noel Tata seen to be opposed to Chandrasekaran's continuation, lack of clarity over how the trusts will vote in their own meeting this Thursday about how to vote in the AGM, as well as the unclear fate of Sir Ratan Tata Trust, the variables that could determine the outcome of the AGM are numerous, in flux and beyond the control of any one entity.

Unplanned Leadership Transition

Sir Ratan Tata Trust (SRTT) is suspended at the moment from all decision-making by the Maharashtra Charity Commissioner.

If the meeting were to be held on August 18 and the outcome is not favourable for Chandrasekaran, it would bring an abrupt and hostile end to his chairmanship, and plunge India's largest business group into an immediate and unplanned leadership transition.

The law permits a company to seek deferment of an AGM by six months if it cannot be held. But the matter of whether a director who needs to be reappointed by shareholders can continue in the interim is up to the discretion of the Registrar of Companies and subject to provisions of the company's Articles of Association (AoA), according to multiple corporate law specialists.

The charity commissioner's ban on SRTT from making important decisions, pending an inquiry into alleged violations of the Maharashtra Charitable Trusts Act, is the key development that has raised a question mark over the legality of holding the AGM.

According to the Tata Sons AoA, trustees jointly nominated by SRTT and Sir Dorabji Tata Trust (together majority owners of Tata Sons) are authorised to vote at the AGM. Since SRTT is suspended, it's unclear if it can nominate trustees for the AGM, absent an express permission from the charity commissioner.

A few SRTT trustees, including Noel Tata, Darius Khambata and Jehangir Jehangir, have sought permission from the Maharashtra Charity Commissioner to participate in the AGM, arguing that attendance is necessary to safeguard the interests of the trust. The signatories to the request to the charity commissioner did not include Vijay Singh and Venu Srinivasan, seen as dissenting trustees by Tata.

Mails sent to N Chandrasekaran, Shapoorji Pallonji (SP) Group and Noel Tata went unanswered.

Multiple trustees, group insiders and executives ET spoke with expressed anguish at the mounting uncertainty, saying the gridlock in the group's multiple decision-making apparatus was beginning to weigh down operating businesses.

One official said voting rights should not be weaponised.

Also read: Vijay Singh exits Sir Ratan Tata Trust, informs he doesn't want reappointment

A highly placed official close to SP Group said, "As a significant minority shareholder, the Shapoorji Pallonji Group has always viewed its interests in Tata Sons in the larger context of the institution and the national interest. Personal or historical differences should not be allowed to overshadow what is in the long-term interest of Tata Sons, Tata group and all its stakeholders. We believe all concerned should approach the present issues with maturity, restraint and a shared commitment to preserving the institution and its legacy."

Under the Companies Act, directors liable to retire by rotation hold office until the date of the relevant AGM, where shareholders are required to either reappoint the retiring director or fill the vacancy. However, the Act is silent on the consequences if the AGM itself cannot be convened because of a lack of quorum, creating a legal grey area.

Ruchi Khatlawala, partner at Little & Co, said Sections 152(6) and 152(7) of the Companies Act lay down the framework for retirement by rotation, and deemed reappointment where a vacancy is not filled at an adjourned AGM.

"However, the Act does not expressly extend the tenure of a retiring director where the AGM itself cannot be held due to lack of quorum," she said. "In such a situation, the legal position would depend on the company's Articles and the provisions governing adjourned meetings. If required, the company may have to seek directions from the appropriate authority or court to ensure compliance with statutory obligations and resolve the resulting governance issues."

The possibility being considered by Chandrasekaran marks an unexpected turn of events, particularly since the trustees, including Noel Tata, had unanimously resolved only about a year ago to recommend another five-year term for him. His reappointment decision was deferred by the Tata Sons board on February 24 this year after Tata raised reservations about the performance of the new businesses. Tata was also in favour of a two-year executive term for Chandrasekaran, in line with the group retirement age of 65 for executive roles.

The uncertainty surrounding the chairman's reappointment as director marks the latest in the series of turbulent events that has engulfed the group since the death, in late-2024, of long-serving group patriarch Ratan Tata. Since then, there has been infighting among trustees, the departure of many of them, meetings with senior government officials who asked the trustees to insulate the group's business operations from their differences, and so on.

(With inputs from Maulik Vyas)