The Tata Sons board has voted in favour of N Chandrasekaran continuing as chairman, but the decision has triggered a dispute within the group. Noel Tata has opposed the move and called the vote “illegal”, reported Moneycontrol.
The Tata Sons board voted 4-1 on September 17 in favour of Chandrasekaran continuing as chairman of the group holding company, told, people familiar with the proceedings, the report mentioned.
The vote has reopened a succession issue that appeared to have been settled only weeks ago.
Noel Tata said that he had voted against Chandrasekaran’s appointment and challenged the validity of the decision.
“I voted against Chandra’s appointment as chairman. My veto was wrongfully overridden on the basis of a legal opinion. The decision is illegal. I recorded my dissent,” Tata said in an interview with Moneycontrol.
According to people cited in the report, the Tata Trusts, headed by Noel Tata, are likely to remove Chandrasekaran as a director at the Annual General Meeting (AGM).
“Once he is ousted as a director, he cannot continue as chairman,” said a person familiar with the matter, mentioned the report.
Another person said one of the Tata Trusts had already voted to begin the succession process and accepted Chandrasekaran’s earlier decision not to seek a third term.
At the centre of the dispute is an article in the Tata Sons Articles of Association. It states that a majority of directors appointed by the Tata Trusts to the Tata Sons board must approve any consequential decision.
The executive management of Tata Sons appears to have proceeded on the basis of a legal opinion that said the chairman of a board meeting has a casting vote in the event of a deadlock.
The Tata Sons board comprises Chandrasekaran, Noel Tata, Venu Srinivasan, Saurabh Agrawal, Harish Manwani and Anita Marangoly George.
Thursday’s vote marks a significant change from August, when Chandrasekaran decided not to seek another term after his current tenure ends in February, next year.
The Sir Dorabji Tata Trust (SDTT), one of the two principal Tata Trusts, later said it respected Chandrasekaran’s decision and began the process of setting up a selection committee to recommend the next Tata Sons chairman.
Attention will now turn to Tata Sons’ adjourned AGM, which is required to be held by December 31.
The AGM is important because Chandrasekaran is due to retire by rotation as a director of Tata Sons. His reappointment as a director will require shareholder approval.
The Tata Trusts collectively own about 66% of Tata Sons, giving them a key role in deciding what happens next.
The two principal trusts, SDTT and Sir Ratan Tata Trust (SRTT), together hold a majority of Tata Sons. Their position on Chandrasekaran’s reappointment as a director will therefore be important when the matter comes before shareholders.
There is, however, another hurdle. SRTT is currently restrained from convening trustee meetings following proceedings before the Maharashtra Charity Commissioner. The restriction has already affected decision-making linked to Tata Sons.
Tata Sons’ AGM, which was originally scheduled for August 18, had to be adjourned after SDTT and SRTT could not jointly nominate the representative required for the meeting.
Unless the issue involving SRTT is resolved before the reconvened AGM, the restriction could again complicate the Trusts’ ability to take decisions relating to Tata Sons.
The AGM could therefore become the next key stage in a leadership issue that has changed quickly over the past month — from Chandrasekaran deciding to leave, to the Trust beginning the search for his successor, and now to the Tata Sons board backing his continuation.