New Delhi: Biggest business house in India, Tata is heading towards a big court battle. Within the Tata empire, there’s a tug of war between two strong groups on who will be at the helm, and they are now lining up lawyers.
What started the fight
This problem was started with main holding company of the group, which called as Tata Sons led by N Chandrasekaran since 2017. He was told to the board in August that he is ‘eating the dust’ and does not wish to serve another term after the expiration of his current one on Feb. 20, 2027. However, a week later on 17th September, the Tata Sons board overturned its decision and gave him another five years by a majority of 4-1.
The only vote against it was cast by Noel Tata. He is the head of Tata Trusts, the charity that owns about 66% of Tata Sons, and usually has the final say on the running of the company. Tata Trusts promptly declared the reappointment as a “legal nullity” as per the policy of the company that asked for two of the Trusts’ nominee directors to vote in favour before a chairman of the board can be appointed. But the Trusts state that the entire decision is flawed because Noel Tata voted no.
In support of its argument, the Tata Trusts recruited heavy-duty lawyers. Justice D.Y. Chandrachud, the former Chief Justice of India, gave an Opinion in favour of the reading of the rules by the Trusts to the Board.
A second disagreement over going public
The battle of leadership isn’t just one between the big boys and the little boys. It’s also about how the dilemma of Tata Sons listing their stocks on the stock exchange should be tackled. The company is considering a plan for it to spin off part of its business for at least $2.6 billion, but Noel Tata wants Tata Sons to remain private. Regulators, with pressure, have pushed the company towards the listing, irrespective of the two sides, as Reserve Bank of India had classified Tata Sons in a category, which usually calls for a public listing.
Why this matters
This battle is unusual for a company known for its slow and steady approach to leadership, Tata a 158-year-old conglomerate. Noel Tata, who has worked behind the scenes for most of his career, is now one of the most powerful decision-makers in Indian business as a stake in his trust gives his trust real influence over the outcome.
Now it appears that the controversy will likely go to the court, and perhaps even to the company’s next annual shareholder meeting in which Tata Trusts’ size will make all the difference in the final decision.Says the governance experts, now it seems the fight is more likely to have a descent to the courts, and perhaps even the next annual meeting of shareholders, where Tata Trusts’ size will play a major part in the outcome. A lengthy court battle could divert attention from Tata Sons at a time when the company has a number of enterprises such as Jaguar Land Rover facing financial difficulties.
On the public front, both sides continue to be adamant on their stance, neither willing to budge.
