Tata Sons to discuss RBI's listing rule, Chandrasekaran's reappointment at Board meeting

Mumbai: The Tata Sons board is heading into Thursday's meeting armed with several legal opinions on two key matters: the central bank's listing directive and the nomination and remuneration committee (NRC) decision to ask chairman N Chandrasekaran to reconsider his plan to step down.

The committee, which has decided to seek Chandrasekaran's reappointment for another five years when his current term ends next February, is likely to meet on Thursday ahead of the board meeting, people familiar with the matter said.

Since the matters are expected to come to a vote, the voting rights of the Tata Trusts nominees and the board chairman under Tata Sons' articles of association are also being looked at closely, an executive said.


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The board is expected to accept the Reserve Bank of India directive, but if Tata Trusts chairman Noel Tata presses the board to challenge it, the meeting could turn contentious, said the people.

Both key agenda items are expected to go through, they said.

However, whether Chandrasekaran, if he decides to continue, would be offered another full five-year executive term, or a combination of executive and non-executive tenures, remains to be seen.

The terms of Chandrasekaran's reappointment for another five years will be heavily debated, executives said. The regulatory issue is also expected to have a direct bearing on the leadership question.

The Tata Sons board is not expected to accept any move to challenge the RBI directive, the people ET spoke with said. If the board accepts the instruction, the company will have to move swiftly to operationalise it and begin preparations for a listing in the coming months. Any legal challenge to the RBI directive would have to be mounted by Tata Sons itself, rather than the charitable Tata Trusts that hold a majority stake in it, they said.

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The position could put Noel Tata at odds with the board if he seeks to push for a legal challenge. Since the Sir Ratan Tata Trust is barred from holding meetings and passing resolutions by the Maharashtra Charity Commissioner pending an enquiry into its board composition, the Sir Dorabji Tata Trust may not have enough support for backing any move to oppose the RBI decision.

The two trusts together hold more than half of Tata Sons stake.

There is also a view among company executives that charitable trusts should not be seen as taking on a commercial regulatory dispute involving Tata Sons, people familiar with the matter said.

The RBI rejected Tata Sons' application to surrender its Certificate of Registration to operate as a shadow bank, and directed it to comply with the regulatory framework applicable to top non-bank finance companies, which requires a public listing.

The issue could also test the special voting provisions in Tata Sons' articles of association. Under Article 121, specified matters require the affirmative vote of a majority of Tata Trusts-nominated directors. With two trust nominees having voting rights, a 1-1 split would mean the required majority of nominees is not obtained, effectively neutralising any Tata Trusts veto. The AoA, however, contain specific provisions for different categories of decisions, and the precise voting requirement would depend on the matter before the board.

The key governance question at Tata Sons is how the voting provisions in its articles of association operate where the two Tata Trusts' nominee directors are divided.

Ketan Mukhija, partner at law firm Kochhar & Co, said Article 121 requires the affirmative vote of a majority of the Article 104B directors (trust nominees) present for matters requiring a majority decision of the board, while also providing for a casting vote of the chairman in the event of an equality of votes.