Tata Sons cites legal opinion from ex-CJI in Chandrasekaran reappointment row

At the September 17 board meeting, Srinivasan joined 3 other Tata Sons directors in voting in favour of N Chandrasekaran's reappointment as Tata Group Chairman.

The Tata Sons Articles of Association, particularly Article 121, have come under scrutiny following the boardroom battle that came to a head on September 17, pitting Tata Sons against Tata Trusts and Noel Tata.

Inside the Tata Sons power struggle: Noel Tata, Chandrasekaran and the key players. (PTI/HT File)

Article 121 requires certain decisions approved by a board majority to also receive the approval of a majority of directors nominated by Tata Trusts. There are currently two Tata Trusts nominees on the Tata Sons board — Tata Trusts Chairman Noel Tata and Vice-Chairman Venu Srinivasan.

At the September 17 board meeting, Srinivasan joined three other Tata Sons directors in voting in favour of N Chandrasekaran's reappointment as Tata Group Chairman, while Noel Tata opposed the resolution. The presiding chairman's casting vote was subsequently used, according to a report by NDTV Profit.

What is happening?

Tata Trusts has argued that a majority of its nominees would require the votes of both Noel Tata and Srinivasan.

It has also maintained that a chairman's casting vote can be exercised only when there is an equal split among the Tata Sons board members and cannot override the requirement for a majority among the Trusts' nominees. "A majority amongst two is two and not one," Tata Trusts said, referring to Noel Tata's vote against the resolution, the report added.

In response to an email from Noel Tata questioning the legality of the September 17 resolution, Tata Sons shared legal opinions from experts including former Chief Justice of India UU Lalit and former Supreme Court judge BN Srikrishna.

Both said the requirements under Article 121 had been met during the vote on Chandrasekaran's reappointment.

Justice Srikrishna, who served on the Supreme Court from 2002 to 2006 and was previously Chief Justice of the Kerala High Court, said, "In my opinion, what has been done is perfectly consonant with the letter and spirit of Article 121. The proceedings before the Board were not intended to be deadlocked in any event, and that is why it is necessary to read this Article in a manner so as to ensure that the proceedings before the Board and the Querist's business are taken forward and satisfactorily concluded."

"I am of the opinion that every Director has two duties - one, his fiduciary duty to the company under the Companies Act and the other to the nominating entity. There is no doubt that the former duty must override the latter in case of a conflict. That is because the former duty is statutory and the latter is only contractual. In the circumstances, Venu Srinivasan rightly acted pursuant to the statutory fiduciary duty," the former judge, who also headed the commission of inquiry into the 1992-93 Bombay riots, added.

Justice UU Lalit, who served as the 49th Chief Justice of India in 2022, concurred with this view.

"In the present case, out of five Members of the Board who cast their vote on the proposal, except Noel N Tata, the other four members had voted in favour of grant of chairmanship to N Chandrasekaran. Since there was equality of votes among the directors pursuant to Article 104(B), the presiding or the officiating chairman, by putting his casting vote, satisfied the requirement under Article 121," the former Chief Justice said.

"Upon there being equality of votes amongst the Directors appointed pursuant to Article 104B, there was certainly an occasion for the chairman to have a casting vote. In my view, therefore, the resolution dated September 17, 2026 for approving the agenda was validly passed," he explained.

Status unaltered

Senior Advocate Sudipto Sarkar, who has served on the boards of several prominent listed companies in India, including JSW Steel Limited, Triveni Engineering Industries Limited and Bombay Stock Exchange Limited, outlined the circumstances in which a casting vote can be exercised.

"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. Accordingly, the expression 'in the case of an equality of votes' may reasonably be construed as applying to either situation," he said.

"Article 118 would not apply to the proposed re-appointment of the chairman (Chandrasekaran). Article 118 is expressly concerned with the selection of a 'new chairman'. The chairman's announcement that he will not offer himself for a further term does not alter his status as the incumbent chairman, and he continues in office until the expiry of his current term in February 2027," Sarkar added.