Tata Sons Defends Chandrasekaran Reappointment in Formal Letter to Trusts

Tata Sons has formally rejected allegations of illegality regarding the reappointment of N. Chandrasekaran as chairman, asserting that the decision aligns with the conglomerate's internal governance framework. In a letter addressed to Noel Tata, chairman of the controlling Tata Trusts, the company defended the board's actions as consistent with its responsibilities and governance protocols.

This communication marks the first official response from Tata Sons to the questions raised by the Tata Trusts, which hold a 66% stake in the conglomerate. The dispute centers on the September 17 board resolution that granted Chandrasekaran a third five-year term. The Trusts have argued that the appointment was invalid, contending that it required the affirmative support of a majority of their nominee directors, a requirement they claim was bypassed by the chairman's use of a casting vote.

Under Article 104B, the two principal registered endowments are entitled to jointly nominate one-third of the total number of directors as long as they maintain a specific equity stake. Furthermore, Article 118 specifies a selection committee process involving nominees from these endowments to choose a candidate before the board makes an appointment.

Former high-ranking judicial figures have provided separate legal opinions supporting the validity of the chairman's exercise of a casting vote during the board proceedings. Additionally, the procedure outlined in Article 118 applies to initial appointments rather than reappointments of a sitting chairman.

To substantiate its position, Tata Sons cited three legal opinions in its letter, including those from former Supreme Court judges Justice B.N. Srikrishna and Justice Uday U. Lalit. These opinions support the validity of the chairman's casting vote under the company's Articles of Association (AoA). Specifically, Justice Srikrishna noted that the action was consistent with Article 121, while Justice Lalit opined that the equality of votes among directors appointed under Article 104B provided the necessary occasion for the chairman to exercise a casting vote.

the legal opinions obtained by the company clarify that the provision in the AoA requiring a Selection Committee applies to the appointment of a new chairman, rather than the extension or reappointment of an incumbent. The company maintains that the resolution for Chandrasekaran's third term followed the same procedural lines as his second term in 2022.

The disagreement over the leadership appointment has evolved into a significant crisis for the 158-year-old Tata group, characterized by a week of public statements and competing claims regarding internal decision-making processes. While Tata Sons has asserted the legality of its actions, the Tata Trusts' legal team is currently vetting the company's response. Neither party has provided further comment outside of these formal exchanges as the internal review continues.