Tata Trusts split spills into Tata Sons boardroom as SDTT seeks to block nominee’s listing vote

Mumbai: A widening split within the Tata Trusts over the impending listing of Tata Sons has spilled into the holding company’s boardroom, with the Sir Dorabji Tata Trust (SDTT) seeking to restrain its nominee director Venu Srinivasan from voting in favour of it, people familiar with the matter said.

SDTT moved a circular resolution late on Wednesday, seeking to prevent Srinivasan from supporting the listing of Tata Sons, the people said. The resolution was signed by SDTT chairman Noel Tata and trustee Darius Khambata.

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It cited Srinivasan’s publicly stated support for the listing and said that as a Trust nominee he was expected to keep the interests and position of the Trust in mind while exercising his rights as a director, those people said.

Srinivasan had rejected the position, arguing that he is a joint representative of the Sir Ratan Tata Trust and SDTT on the Tata Sons board and that SDTT cannot unilaterally restrain him from discharging his responsibilities as a director, according to people aware of his response.

Srinivasan is understood to have told the Trust in his reply that his primary obligation as a Tata Sons director is to discharge his statutory duties under the Companies Act and exercise independent judgment in the interests of the company and its stakeholders. Requiring him to vote in a predetermined manner on the listing, he argued, would be inconsistent with those duties, he is said to have told the Trust.

The dispute comes as the Tata Sons board meets on Thursday, with the Reserve Bank of India rejecting the company’s application to surrender its core investment company registration. NBFC’s coming in the RBI’s definition of Upper Layer are mandated to list on stock exchanges.

The board is expected to accept the RBI directive, people familiar with the matter said. If it does, Tata Sons will have to move swiftly to comply with regulations applicable to upper-layer non-bank finance companies, including the requirement for a public listing, 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, which together hold more than half of Tata Sons, the people said.

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That could put Noel Tata at odds with the board if he seeks to challenge the RBI decision. The Sir Ratan Tata Trust is currently barred from holding meetings and passing resolutions by the Maharashtra Charity Commissioner pending an inquiry into its board composition, potentially limiting the support available to any move to oppose the RBI directive, the people said.

The listing dispute is one of two major issues before the board. The nomination and remuneration committee which is meeting today is set to ask chairman N Chandrasekaran to reconsider his plan to step down when his current term ends next February.

The committee has proposed seeking his reappointment for another five years, although the terms of any new tenure — whether a full executive term or a combination of executive and non-executive roles — are expected to be debated, the people said.

The regulatory and leadership questions could also test the special voting provisions in Tata Sons’ Articles of Association.

Under Article 121, certain matters require the affirmative vote of a majority of the Tata Trusts-nominated directors. With two such nominees having voting rights, a split between them could become significant. The Articles also provide for a casting vote by the chairman in the event of a tie.

The issue is particularly relevant to Chandrasekaran’s proposed reappointment, given a separate requirement under Article 118 concerning the affirmative vote of the Article 104B directors for appointment of the chairman, he said. The RBI-related resolution would have to be assessed separately under the provisions applicable to that matter.

The SDTT move highlights the widening divergence between the Tata Trusts’ nominees. Noel Tata has opposed a listing and maintained that Tata Sons should remain private, while Srinivasan has publicly supported a listing.

The Trusts have historically exercised significant influence over Tata Sons through their shareholding and rights under its Articles of Association, including special rights for their nominees on specified board matters.