Tata Trusts says Tata Sons board resolution on Chandrasekaran reappointment invalid - What's the matter

Tata Trusts has said Tata Sons’ September 17 board resolution to reappoint N Chandrasekaran as chairman was invalid because it lacked the required support from the Trusts’ nominee directors under the company’s Articles of Association.

Tata Trusts said on Sunday that the resolution to reappoint N Chandrasekaran as Chairman of Tata Sons was not validly passed at the company’s September 17 board meeting because it did not receive the required support from Tata Trusts’ nominee directors.  

According to Tata Trusts, Tata Sons’ Articles of Association (AoA) require the affirmative vote of a majority of directors nominated by Tata Trusts, which holds around 66% of the company. With two Tata Trusts nominees on the board, both directors would need to support the resolution for this separate requirement under the AoA to be fulfilled.  

Tata Trusts said that one of its two nominee directors voted against the resolution on September 17, meaning the required affirmative support was not secured.

The Trusts also clarified that the Chairman’s casting vote cannot be used to override this requirement. Such a vote applies only when there is a tie in the overall board vote and does not extend to the separate condition requiring support from Tata Trusts’ nominee directors. 

“There was no paralysis and there was no deadlock. The Board put a question, and the AoA answered it in the negative,” the Trusts said.

The Trusts also cited Supreme Court proceedings related to the removal of former Tata Sons chairman Cyrus Mistry, noting that Tata Sons had previously defended the affirmative voting rights of Trusts’ nominee directors under Articles 104B and 121.

According to the release, the National Company Law Appellate Tribunal had earlier held these voting rights to be oppressive. However, the Supreme Court accepted Tata Sons’ position and overturned the tribunal’s finding.

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The Trusts said Tata Sons cannot now disregard the protections it had previously defended before the Supreme Court.

Tata Trusts also rejected the contention that listing Tata Sons would be necessary to improve its corporate governance. It pointed to existing provisions relating to independent directors, audit and nomination committees, related-party transactions, retirement of directors by rotation and insider trading.

According to the Trusts, Tata Sons had voluntarily adopted these governance standards before the current dispute arose.

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With ANI inputs ...

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