Tata Trusts Call Chandrasekaran Reappointment Resolution Illegal, Say Decision Not to Seek Fresh Term Final

In a dramatic turn of events, the Tata Trusts on Thursday said the resolution to re-appoint N. Chandrasekaran as Chairman of Tata Sons is illegal and his decision not to offer himself for reappointment upon the conclusion of his current tenure on February 20, 2027, has been duly accepted and has attained finality. Reports earlier claimed that Tata Sons' board backed a fresh five-year term for Chandrasekaran and cleared the company's long-pending listing plan. In a statement, Tata Trusts said that on August 12, Chandrasekaran communicated to the Tata Sons Board, "his own decision not to offer himself for reappointment - a decision that was freely taken, clearly expressed and not the outcome of any process of review".

The decision was made public without prior intimation or any deliberations with the shareholders of the company. "Once such a decision has been publicly communicated, it has consequences which cannot be afterwards undone, since the Group’s employees, its lenders and counterparties, the market and the majority shareholder have all proceeded on it," Tata Trusts said. The Tata Trusts "formally placed on record their acceptance of the decision the following day and advised Tata Sons to initiate the process for setting up a Selection Committee for appointing a successor, in accordance with the Articles of Association of Tata Sons".

It further stated that the Trusts’ position remains unchanged, as a considered judgement of a majority shareholder. "This position was reiterated in today’s board meeting by the Chairman, Tata Trusts. The resolution seeking to reappoint Mr N. Chandrasekaran in the Board meeting today, with four Directors voting in favour and Mr Noel Tata against, was a legal nullity in view of the provisions of the Articles of Association of Tata Sons," the statement noted. The statement further stated that the Board, accordingly, 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.

"Given that Mr Noel Tata, being one of the Trust nominee directors, voted against the proposal, it was rendered legally void and without any basis. Noel N. Tata further submitted a legal opinion obtained from Justice Dr DY Chandrachud (former Chief Justice of India) regarding the correctness of the Trusts’ stand," the statement said. The development decision comes weeks after the Reserve Bank of India directed Tata Sons to proceed with a listing. In addition, the RBI had classified Tata Sons as an upper-layer non-banking financial company, requiring it to list within three years, in 2022.

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