The rift between over the re-appointment of N Chandrasekaran as the latter’s chairman has spilled from the ‘real issue’, senior advocate Harish Salve told .
Salve, who is the legal advisor to Chandrsekaran, told the publication that the focus of the affair has shifted to the board meeting in which Chandrasekaran’s re-appointment was confirmed instead of those concerns which were laid out in front of Sir Dorabji Tata Trust Vice Chairperson and Tata Sons Director Venu Srinivasan in a letter by Tata Trusts.
“In their words, you are supportive of the listing of this company, the Tata Trusts are against the listing of the company. You, Mr Srinivasan, are, therefore, conflicted,” Salve told NDTV.
Salve also said, “A lot of short answers for what you said. Bigger issues are at play. Let’s not miss the wood for the trees. It’s a good forensic ploy to obtain legal advice,” when he was asked about how the board could go against the wishes of shareholders (Tata Trusts owns 66% of Tata Sons) while choosing their Chairman.
Salve has questioned the RBI’s rationale for its directive that Tata Sons be publicly listed following its classification of the latter as an upper-layer non-banking financial company ().
Salve said that in 2019, the central bank had indicated that those companies which have access to public funds can, only under certain circumstances, remain outside the framework of the upper-layer. However, it later reconsidered its stance on the matter. The RBI’s reason behind the reconsideration was that a company can indirectly access public funds if a company within a group.
For an example, Salve cited the 4% stake that Tata Steel owns in Tata Sons, which comes to around ₹40,000 crore. If Tata Sons is listed, Salve says that this will allow Tata Steel to monetise its share in the conglomerate and deleverage, and if it holds onto its share, the would be reliant on the dividends Tata Sons pays it in order to service its debt.
For a company to be classified as an upper-layer NBFC, its size should be more than ₹1 lakh crore or USD 10 billion, Salve said, adding, “Tata Sons, roughly valued at $20-25 billion. Tata Group itself plus Tata Sons valued at $270 billion. Our economy will be affected if something happens to Tata Sons.”
Salve told NDTV that the direction by the RBI to Tata Sons to list themselves on the stock exchange raises questions regarding its oversight of Tata Sons’ board as well as corporate governance.
. “What happens when the regulator says, list yourself? A: Corporate governance runs dry. B: The Reserve Bank has the right of oversight over who comes on the board,” Salve told NDTV.