Casting vote by Chairman can’t be used to defeat veto rights of Tata Trust nominated directors, former Chief Justice of India D Y Chandrachud said in his legal opinion on the issue of Tata Sons Chairman N Chandrasekaran’s reappointment.
Justice Chandrachud’s opinion was submitted by Tata Trusts Chairman Noel Tata as he tried to block resolution at Thursday board meeting that gave Chandrasekaran a third term from February 2027.
The Tata Sons board did not take note of the legal opinion and approved the re-appointment by a majority vote.
Tata Sons Article of Association states that appointment of the chairman of the board requires an affirmative vote of majority of Trust nominated directors present at the meeting. In case of an equality of votes, the chairman will have the casting vote.
In Justice Chandrachud’s view, the Articles of Association cannot be interpreted to mean that the presence of both nominee directors is necessary but the affirmative voting rights of one nominee director can be superseded by the casting vote of the chairperson.
“If the articles provide that a resolution shall not be validly passed unless it commands the affirmative vote of a specified majority of a particular class or group of directors, a casting vote exercised by the chairman cannot supply that missing affirmative vote,” he opined.
“This is consistent with the well-settled principle that a casting vote cannot be used to create a majority where none exists under the governing provision, or to defeat a veto right held by a particular constituency of directors,” he said.
Affirmative vote
Chandrachud said affirmative voting rights are central to establishing control and safeguarding interests of parties they favour.
Chandrachud opined that affirmative vote of the nominee directors is an independent and standalone requirement and operates on a wholly different plane from the chairperson’s casting vote which is designed to resolve a tied vote amongst all directors of the board taken cumulatively.
“The casting vote of the chairperson is only applicable where there is an equality of votes amongst two functions of the board as a whole, and not amongst two specific directors, whether they be nominee directors or not,” he said.
“Given that one of the two nominee directors has not voted in favour of the resolution, the requirement that a majority of nominee directors support the resolution has not been satisfied in the second scenario. The resolution in the second scenario is invalid…Irrespective of the chairperson’s casting vote resolving the deadlock between the nominee directors, the affirmative vote of a majority of the nominee directors was not secured,” he said.