Tata Sons board's decision to reappoint N. Chandrasekaran as Executive Chairman for another five-year term (his third term) has led to a stand-off between Tata Sons and its majority shareholder, Tata Trusts.
The Trusts, the charity arm of Tata, hold around a 66% stake in Tata Sons.
This has opened the door to a corporate governance dispute requiring interpretation of the company's Articles of Association, evoking memories of the bitter power struggle between Tata Sons and Cyrus Mistry.
Tata Sons says Chandrasekaran agreed to reconsider his earlier decision not to seek another term and was then reappointed through a valid board process.
Tata Trusts, on the other hand, contests that account.
To It, Chandrasekaran's earlier decision had already been accepted, and the later resolution didn't meet the voting safeguards in the Articles of Association.
The immediate issue is whether the board could have validly approved the reappointment after the two Tata Trusts-nominated directors voted differently and whether the chairman's casting vote could overcome that 1–1 split.
What happened on September 17?
According to Tata Sons, Chandrasekaran had informed the board on August 12, 2026, that he would not be offering himself for reappointment when his current term ended on February 20, 2027.
On that basis, the Trusts say that Tata Sons should have gone ahead with the Selection Committee process for finding a successor rather than asking Chandrasekaran later to reconsider his decision.
Tata Sons, however, says its Nomination and Remuneration Committee looked into the matter later and unanimously recommended Chandrasekaran continue.
Chandrasekaran accepted that request at the September 17 board meeting after which the board approved his reappointment by a majority of four to one.
Noel N. Tata (Chairman of Tata Trusts and nominee director on the Tata Sons board) opposed it; Venu Srinivasan (the other Tata Trusts-nominated director) supported it.
Reports also claim that the voting deadlock was resolved by a casting vote by Tata Sons' Chairman.
Tata Trusts have contested the legal effect of that vote.
Tata Trusts' objection
Tata Trusts issued a statement on September 17 opposing Chandrasekaran's reappointment.
To the trusts, Chandrasekaran's decision to take up another term was “freely taken, clearly expressed," and not the result of any review process. It said the decision had been communicated to the board and accepted by the Trusts on August 13.
The Trusts are of the opinion that once the decision was accepted, Tata Sons should have started the process of setting up a Selection Committee to appoint a successor in accordance with the Articles of Association.
This public disclosure of Chandrasekaran's decision, according to Trusts, had consequences for “the Group's employees, its lenders and counterparties, the market and the majority shareholder” so it could not be undone afterwards.
The Trusts also challenged the board process itself.
It stated “The process for appointing a Chairman under the Article of Association is that a majority of the Trusts' Nominee Directors vote in favour of the resolution”.
It further stated, “That process applies equally to a first appointment and to reappointing someone who already holds the office.”
There were two Trust-nominated directors on the board (Noel Tata and Venu Srinivasan). Noel voted against the proposal while Srinivasan voted for it.
The Trusts, therefore, is of the view that affirmative support from its nominee directors was not obtained.
It said that “the board cannot lawfully hold a meeting or pass a resolution on the Chairman's appointment or reappointment unless both nominee directors are present and cannot validly pass such a resolution unless both nominee directors vote in favour”.
It has described the resolution as “a legal nullity” and said it was “legally void and without any basis”.
The Articles of Association controversy
The central controversy that has emerged right now is whether Tata Sons' Articles require two forms of approval or a majority vote to reappoint.
Approval of the trust needs to be twice as much, says the trust.
• The requisite majority of the full Tata Sons board; and
• The positive support of a majority of the Trust's nominee directors.
On this interpretation the full board's support was not enough.
The two Trust nominees voted 1–1, so the Trust says the majority among them wasn't there.
“There are two Tata Trusts nominees on the Board of Tata Sons. Majority amongst two is two and not one,” says the Trust in its September 20 statement.
“The affirmative support of Tata Trusts Nominee Directors as required by AoA was not given. Condition failed and resolution failed,” it thus says.
Public reports list Articles 118 and 121 as the main provisions in dispute.
Article 118 is said to cover the appointment of the Tata Sons chairman and the Selection Committee process in case relevant Tata Trusts continue to hold the prescribed level of ordinary share capital of Tata Sons.
Article 121 is said to deal with board decisions requiring a majority vote. Tata Trusts interpret this as affirmative support of a majority of the Trusts' nominee directors in addition to the required majority of the full board. The article is said to contain provision for casting-vote in case equality of votes occurs.
Tata Trusts says the Selection Committee process should have been followed after Chandrasekaran didn't want to go for another term.
It also says that the nominee-director approval requirement applied to his reappointment and was not met because the two nominees were divided equally.
Tata Sons, however, has interpreted the Articles differently. The company has taken the Nomination and Remuneration Committee recommendation, Chandrasekaran's decision to stay on, and the board approval as sufficient.
The casting-vote issue
Tata Trusts' second major objection concerns the casting vote reportedly exercised by the chairman of the meeting.
Tata Sons' position is that the voting process resulted in a deadlock and that the Articles of Association permitted the meeting's chairman to use a casting vote to resolve it.
Tata Trusts disputes that account. It says that the 1–1 division between its two nominee directors was not the kind of deadlock that could be resolved through a casting vote.
In this respect, the September 20 statement goes,
“The Chairman's casting vote is available only where there is equality of votes at the overall board level. It does not apply to Tata Trusts' Nominee Directors.”
The Trusts added:
“Whether the result of the vote was 4:1 or any other figure is irrelevant. A condition is either met or it isn't — and in this case the condition wasn't met.”
The Trusts also rejected the view that the split between the two nominees created a deadlock which could be broken by casting vote.
It said, “The Trusts reject any suggestion that such a split would produce a deadlock which could be resolved by casting vote.”
“There was no paralysis and there was no deadlock. The Board put a question, and the AoA answered it in the negative.”
Tata Trusts say, therefore, that the resolution was invalid before the casting vote was exercised and that the casting vote could not give it legal effect.
Tata Sons' position
Tata Sons' position in the whole controversy is that the Nomination and Remuneration Committee reviewed Chandrasekaran's earlier decision properly (i.e., unanimously recommended he reconsider it) and not just reviewed it but also made sure it was done properly.
The company says Chandrasekaran accepted the recommendation and that the board then voted on his reappointment through the applicable voting process in a 4-1 majority.
Tata Sons therefore treated the resolution as a board decision. They also say that since the casting vote was in favour of the appointment, then there is now no 1-1 tie between members representing the trusts because the tie stands broken by the fact that the casting vote was in favour of the appointment.
The Supreme Court precedent relied on by Tata Trusts
Tata Trusts has also referred to the Supreme Court's 2021 judgment in the Cyrus Mistry litigation to back up its case.
That case, much like the controversy that we are witnessing right now, concerned the validity of special affirmative voting rights given to Tata Trusts-nominated directors under Tata Sons' Articles of Association.
The Supreme Court set aside the National Company Law Appellate Tribunal's decision and upheld the validity of those rights, holding that they were incorporated into the Articles and were not, by themselves, oppressive or unlawful.
Tata Trusts is now relying on that ruling to argue that Tata Sons cannot go against something that it has defended up until the Supreme Court of the country.
The wider issue brewing
The dispute over Chandrasekaran's reappointment is part of a broader disagreement that has been developing between Tata Sons and Tata Trusts for several months.
Reuters reported that the two sides have been at odds over the potential listing of Tata Sons, Air India's mounting losses, and the proposed exit of a minority shareholder.
Against that background, the Tata Sons board's decision to reappoint Chandrasekaran, despite opposition from Noel Tata, the head of Tata Trusts, has brought the disagreement into the open.
Reuters described the resulting confrontation as the conglomerate's "worst crisis in years."
Tata Sons had asked for its registration as an upper-layer non-banking financial company to be surrendered. Reuters said the Reserve Bank of India rejected that request, and Tata Sons now has to deal with regulatory consequences (listing) from that classification.
The Tata Sons board has reportedly decided to take steps towards compliance and seek guidance from RBI, Tata Trusts, and other stakeholders.
Tata Trusts has opposed the proposed listing and said that Tata Sons' ownership by charitable trusts gives the company a distinctive character.
Reuters said Shapoorji Pallonji Group, which owns about 18.37% of Tata Sons, backs a listing.
Going Forward
As the struggle tightens, what we expect is a boardroom scuffle, which may very well end up with Tatas knocking on the doors of NCLT Mumbai.