Tata Sons vs Trusts may shift from boardroom to courtroom

Mumbai: Tata Trusts, headed by Noel Tata, is preparing to legally challenge the Tata Sons board's decision to reappoint N Chandrasekaran as chairman, and seek judicial intervention to maintain the status quo on his tenure, people familiar with the matter said.

The Trusts will wait for an official response from Tata Sons to Noel Tata's letter of last Friday to the holding company's board, before deciding on its legal course of action, officials close to the matter said. In a strongly worded letter to Tata Sons company secretary Suprakash Mukhopadhyay, marked to all directors, Tata said the resolution on the chairman's reappointment was "null and void ab initio," and demanded the company issue a public correction on what transpired at the meeting.

Also read | Tata Trusts says Chandrasekaran reappointment resolution was invalid, rejects casting-vote argument


The Trusts has evaluated approaching the National Company Law Tribunal or Bombay High Court, said the people.

Litigation Costs may Come in Focus

Tata Trusts could seek to challenge the validity of the resolution passed by the Tata Sons board last Thursday, said people aware of developments. The move to approach the higher court will be on the basis of majority shareholders' rights, they said.

Tata Trusts is expected to fund the legal costs of any litigation arising from the ongoing dispute. People familiar with the matter said the Trusts has, in the past, passed resolutions providing for litigation-related expenses, and is adequately insured to cover such costs. However, two key trustees, Vijay Singh and Venu Srinivasan, are understood not to have signed such resolutions, taking the view that any legal matter involving the Trusts should be considered on a case-by-case basis, people aware of the matter said. The issue could assume significance as the Trusts prepares to challenge the board's decision on Chandrasekaran's reappointment and seeks legal intervention to maintain the status quo, said the people cited. The Reserve Bank of India (RBI) has already filed a caveat petition in the Bombay High Court, asking to be heard in case Tata Trusts seeks relief against the regulator's directive on the listing of Tata Sons.

Also read | Big-league lawyers enter fray as warring Tata factions dig in for looming court battle

At the Tata Sons board meeting last week, a majority of the members voted in favour of listing and Chandrasekaran's reappointment as chairman. Tata Trusts chairman Noel Tata had opposed both resolutions. This triggered a broader disagreement between Tata Trusts and Tata Sons over the validity of board resolutions, conditions attached to voting and the interpretation of the company's Articles of Association.

Ashish Bhakta, founding partner of law firm ANB Legal, said Tata Trusts will be weighing options on challenges. "While NCLT would be the natural jurisdiction to seek relief under the Companies Act and halt the board's decisions to confirm the extension of Chandrasekaran's reappointment on the board of Tata Sons, to approach the Supreme Court in the circumstances available to the public seems plausible only by invoking the writ jurisdiction under Article 32," said Bhakta. "The constitution bench in Kaushal Kishor has held that a writ lies against a party who is not a state if the fundamental rights under Articles 19 and 21 stand breached. Accordingly, it would be interesting to see which provisions are being invoked." This means writ petitions can be filed against non-state entities if fundamental rights under Articles 19 or 21 are regarded to be violated.

Himanshu Vidhani, founding partner of law firm Quadra Legal, said NCLT was the appropriate forum. "Tata Sons, for its part, has no reason to move any forum at all. Its only real regulatory exposure is before the Bombay High Court on RBI's rejection, and RBI has already filed a caveat there," said Vidhani. "Albeit it will be a respondent in any case filed by Tata Trusts in any court such as the Supreme Court, Bombay High Court or even NCLT."

Senior counsel Abhishek Manu Singhvi, representing Tata Trusts, posted on X that the fundamental rights of shareholder-owners cannot be nullified in the manner in which they have been.

"Rupturing over a hundred years of Tata Trusts and Tata Sons established hyphenated relationship and divorcing one from the other seems unthinkable," he said on Sunday. "Ignoring the unvarying precondition of Trust unanimity in voting, and the clear veto in provisions applied without cavil for decades, appears patently unjustified." The Supreme Court judgement in the Tata-Mistry case clearly gave Tata Trusts primacy in the relationship with Tata Sons, said Singhvi. It also "upheld the special Articles in this regard in the Tata Sons articles and spoke of the fiduciary duty to millions of Indians," he said.

Senior counsel Harish Salve, backing the Tata Sons chairman, has described Tata Sons' legal position as "legally perfect," asserting that the company must comply with RBI regulations, which include becoming a public company.