The ongoing differences between Tata Sons and Tata Trusts have intensified into a legal and governance dispute, with legal experts divided over whether the Tata Sons board can approve key decisions when a Trust-nominated director votes against them.
At the centre of the disagreement are Tata Sons’ Articles of Association (AoA), which contain special provisions governing decisions involving Trust-nominated directors.
Experts Offer Different Interpretations
Senior advocate and former Solicitor General Harish Salve has raised concerns that a strict interpretation of the AoA could leave Tata Sons deadlocked if its two Trust nominees disagree. He argued that there should be a mechanism, such as a casting vote, to resolve such situations.
However, senior advocate HP Ranina offered a different interpretation, saying the AoA must prevail where they specifically require agreement between Trust-nominated directors. According to him, a casting vote cannot override such a requirement.
Corporate lawyer Nitin Potdar also questioned the board’s recent decision-making, arguing that directors are required under Section 166 of the Companies Act to follow the company’s AoA and act in its best interests.
Ruchir Sinha, managing partner at Resolut Partners, said publicly available information suggests that the required consent from Trust-nominated directors may not have been obtained. He also highlighted questions surrounding N Chandrasekaran’s continuation as a director following the postponement of Tata Sons’ August 2026 AGM.
Possible NCLT Proceedings
If Tata Trusts decides to escalate the matter, the National Company Law Tribunal (NCLT) could become the next legal forum. Experts said the Trusts may potentially approach the tribunal under Section 241 of the Companies Act, alleging that their governance rights have been undermined.
Legal experts, however, noted that such a case could face significant hurdles, particularly following the Supreme Court’s 2021 judgment in the Cyrus Mistry case.
Listing Adds Another Flashpoint
The proposed listing of Tata Sons could create another point of disagreement. While the board can prepare for a listing, changes to the company’s AoA and conversion into a public company would require shareholder approval.
With Tata Trusts holding around 66% of Tata Sons, the Trusts could potentially block a 75% special resolution. The dispute could therefore develop into a significant governance and regulatory test for Tata Sons.