MUMBAI: The largest shareholder in Tata Sons, Sir Dorabji Tata Trust (SDTT), is weighing legal options including a possible plea before the Mumbai bench of the National Company Law Tribunal, to challenge N Chandrasekaran’s reappointment as chairman for five years, according to people familiar with the matter.The development follows Tata Sons board’s decision to reappoint Chandrasekaran after he agreed to reconsider his earlier decision not to seek another term. His current tenure ends Feb 20, 2027.Tata Trusts, which collectively hold about 66% of Tata Sons, has called the reappointment resolution a “legal nullity,” arguing it was passed in breach of the company’s Articles of Association in defiance of the majority shareholders’ view. SDTT alone holds about 28%.A petition would likely invoke Sections 241 and 242 of the Companies Act, the statutory framework for oppression and mismanagement claims, under which the tribunal can regulate a company’s affairs and modify agreements involving directors.The dispute centres on Article 121 of the Tata Sons’ Articles, which requires the majority vote of Trusts’ nominated directors on Tata Sons board, with the chair of the meeting holding a casting vote in the event of a tie.“The case would be that the reappointment was made in breach of the articles and that Tata Sons’ affairs were consequently being conducted in a manner prejudicial or oppressive to its members, or prejudicial to the interests of the company,” said Rahul Dwarkadas, founder of RJD & Partners.Trusts argued that both nominees on Tata Sons board-Trusts chairman Noel Tata and vice-chairman Venu Srinivasan-would have to vote in favour of any resolution for it to pass. Even if one opposes, the meeting chair’s casting vote cannot override it. Noel voted against Chandrasekaran’s reappointment; Srinivasan voted for.Tata Sons read the provision differently, maintaining that a split between the two nominee directors would be resolved by a casting vote. Independent director Harish Manwani, who chaired the meeting for consideration of the resolution, exercised the casting vote in favour of Chandrasekaran. Chandrasekaran could not vote on his own reappointment. The other directors supporting the resolution were Srinivasan, Anita George and Saurabh Agrawal, against Noel’s lone dissent, resulting in a final tally of four votes in favour and one against.A petitioner could seek an order under Section 242 setting aside the reappointment and other relief. But Dwarkadas cautioned that a breach of the Articles, even if established, would not by itself amount to oppression or mismanagement. “The petitioner would still have to satisfy the statutory requirements of Section 241 and the conditions for relief under Section 242,” he said.Trusts took a legal opinion from former Chief Justice of India D Y Chandrachud for interpretation of the Articles, while Tata Sons took a legal opinion from senior advocate Sudipto Sarkar. Tata Trusts did not respond to a request for comment.A legal challenge from the Trusts would revive memories of the battle that followed Cyrus Mistry’s removal as Tata Sons chairman in Oct 2016. Mistry-linked companies brought proceedings under the same two sections alleging oppression and mismanagement by majority shareholders of Tata Sons. The dispute reached the Supreme Court, which ruled in favour of Tata Sons in 2021. The present dispute turns instead on the validity of a single board resolution under Tata Sons’ Articles.
