After Tata Sons approved a fresh five-year term for N Chandrasekaran as executive chairman, Tata Trusts issued a statement saying it maintains that the resolution to reappoint Chandrasekaran “is illegal”. Tata Trusts chairman Noel Tata reiterated the same position during the Tata Sons board meeting, according to the statement.
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Noel voted against Chandrasekaran’s reappointment, but the resolution was approved by a majority of the Tata Sons board.
Tata Trusts said the resolution was a “legal nullity” in view of the provisions of the Articles of Association of Tata Sons. According to the statement, the process for appointing a chairman requires a majority of the Trusts’ nominee directors to vote in favour of the resolution. It said the same process applies to both the first appointment of a chairman and the reappointment of an existing chairman.
The statement further said the board cannot lawfully hold a meeting or pass a resolution on the chairman’s appointment or reappointment unless both Trust nominee directors are present.
It also said such a resolution cannot be validly passed unless both nominee directors vote in favour. Since Noel Tata, one of the Trust nominee directors, voted against the proposal, Tata Trusts said the resolution was rendered legally void and “without any basis”.
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In a separate statement, Noel Tata said the resolution to reappoint Chandrasekaran would require the board to disregard three factors: Chandrasekaran’s own stated decision, the acceptance of that decision by the majority shareholder, and the subsequent process that the shareholder had asked Tata Sons to initiate.
“A resolution now for re-appointment moved at this meeting would therefore ask this Board to set aside three things at once: the Chairman’s own stated decision, the acceptance of that decision by the majority shareholder, and the further process which that shareholder has asked this Company to set in motion,” Noel said via a statement.
The Tata Trusts statement also said that Noel Tata had submitted a legal opinion from former Chief Justice of India Justice Dr DY Chandrachud supporting the correctness of the Trusts’ position. However, the statement said the Board did not take note of the opinion.