Tata Sons has defended its decision to reappoint N. Chandrasekaran as chairman for another five years, saying the board’s decision was taken in accordance with applicable laws and the company’s rules.
In a letter dated September 24 to Tata Trusts chair Noel Tata, Tata Sons group company secretary Suprakash Mukhopadhyay said the company had obtained legal advice before and after the September 17 board meeting.
Tata Sons cites three legal opinions
According to an executive familiar with the matter, Tata Sons first sought an opinion from lawyer Sudipto Sarkar before the board meeting. It later obtained separate opinions from former Chief Justice of India U.U. Lalit and former Supreme Court judge B.N. Srikrishna.
“The board, by a majority resolution, validly resolved to reappoint Mr N. Chandrasekaran as the chairman upon the expiry of his existing tenure,” Tata Sons said in its letter, according to the executive.
The response came after Noel Tata wrote two letters on September 18 questioning the legality of Chandrasekaran’s reappointment.
The September 17 board decision was unusual as Tata Sons’ board went against its main shareholder, Tata Trusts. Noel Tata and Venu Srinivasan, the Trusts’ nominees, voted against the reappointment, while independent director Harish Manwani cast the deciding vote in favour of Chandrasekaran.
Tata Trusts and Tata Sons differ over Article 121
At the centre of the dispute is Article 121 of Tata Sons’ Articles of Association, which deals with voting and the chairman’s casting vote.
Tata Trusts has argued that only a majority vote of its trustees could approve the reappointment. It also maintained that Noel Tata’s opposition meant there was no tie that could be resolved through a casting vote.
“A casting vote cannot revive a stillborn resolution,” Tata Trusts said.
Tata Sons, however, has relied on the legal opinions it obtained to support the board’s decision.
Sarkar’s opinion, received on September 16, said, "On a plain reading of Article 121, it can be said that the chairman’s casting vote can be invoked in either of the following situations: (i) where there is an equality of votes amongst the directors appointed pursuant to Article 104B; and (ii) where there is an equality of votes of the board as a whole after taking into account the votes cast by all directors."
Srikrishna also backed the interpretation, saying, “In my opinion, what has been done is perfectly consonant with the letter and spirit of Article 121,”
Lalit similarly said, “Since there was equality of votes among the directors’ appointment pursuant to Article 104(B), the presiding or the officiating chairman, by putting his casting vote, satisfied the requirement under Article 121,”
Tata Sons and Tata Trusts did not respond to email queries seeking comment.