Towards Quietus: Will the peace hold at Tata Trusts after Mehli Mistry’s exit?

Till a few months ago, Mehli Mistry was not widely known outside the small business circles of Mumbai. Even three years ago, his name made barely a ripple when he became a trustee at Sir Dorabji Tata Trust and Sir Ratan Tata Trust. Known to be a close associate of Ratan Tata, the Tata group’s former Chairman, he shot into the limelight as a boardroom battle at the Tata Trusts came into the open.

By October 28, when Mistry’s reappointment as a lifelong trustee came up, all eyes were on Bombay House, the headquarters of the salt-to-semiconductor behemoth. The vote went against Mistry; he was ousted from Tata Trusts.

The differences in the board of Tata Trusts, which controls 66% in Tata Sons, the principal investment and holding company of the group, come just a year after Ratan Tata’s demise and the elevation of his half-brother Noel Tata as Chairman of the trusts.

The proximate trigger was a vote against the reappointment of Vijay Singh as a nominee on the Tata Sons board. The Trusts appoint one-third members of Tata Sons’ board.

Incidentally, it was Mistry who proposed Noel Tata’s name for Chairman of the Trusts in October 2024, which was passed unanimously. But just a year later, it was Noel Tata and two others—Venu Srinivasan and Singh—who voted against Mistry’s reappointment.

Mistry has filed a caveat before the Maharashtra Chairty Commissioner asking that he receive a hearing in case the Trusts move to formalise his ouster.

Since then, Mistry has made peace overtures to the board and has stepped down as a trustee. In a letter addressed to Noel Tata, he said, “Precipitating matters would cause irreparable harm to the reputation of the Tata Trusts”.

In the letter, dated November 4, Mistry has said it should put “quietus on speculative news reports that do not serve the interests of the Tata Trusts and are inimical to its vision”. He has stated his commitment to Ratan Tata’s vision, which “includes a responsibility to ensure that the Tata Trusts are not plunged into controversy”.

Whether Mistry still wishes to legally challenge his ouster is not clear. That said, the more important question is what this means for Tata Trusts.

A Complicated House

At the heart of the boardroom battle is the Tata group’s unique structure. The Trusts control Tata Sons, a privately held company that has come under pressure from the Reserve Bank of India to go public since it has been classified as an upper layer non-banking financial company (NBFC). Under the Reserve Bank of India’s Scale-Based Regulation, such NBFCs are required to list or deregister.

The Trusts and Tata Sons are opposed to this move to protect the Trusts’ stake, their voting rights and the freedom to fund philanthropic projects. The Shapoorji Pallonji Group, the second-largest shareholder in Tata Sons with an 18.4% stake, has backed the call for an initial public offering as battles to pare down its substantial debts.

According to Avanti T. Chandele, Partner at law firm Mind Legal, the foundation as well as the governance of both a trust and a private company are completely different. “In the case of Tata Trusts, they are a public trust, governed by the Maharashtra Public Trust Act, 1950. The Tata Trusts are under the regulatory supervision of the Charity Commissioner, Maharashtra, and do not have a separate legal entity,” she says.

By comparison, a company, be it public or private, is governed by the Companies Act, 2013. It operates under the regulatory authority of the Registrar of Companies and Regional Director, that come within the purview of the Ministry of Corporate Affairs. “They have a separate legal entity and are formed via a Memorandum of Association and Articles of Association,” says Chandele.

Sukrit R. Kapoor, Partner (Disputes and Litigation), King Stubb & Kasiva, Advocates and Attorneys, says unlike a company, Tata Trusts is a non-profit. “The trust has its own trust deed and follows the principles laid down there. Besides, the trust has its own board of trustees who act and function as per the trust deeds,” he says.

The profits earned by Tata Sons flow into Tata Trusts, which, in turn, use the money for public welfare and charitable causes. The Indian Trust Act, 1882, says Kapoor, is an indication of how long trusts have been around in India.

So, any challenge is unlikely to be straightforward.

Getting All On Board

Complicating matters is an unanimity clause that was brought in last year after Noel Tata’s elevation, which removes tenure limits for trustees, making them eligible for lifetime appointment. However, the trustees must receive unanimous approval for such reappointment.

An investment banker who has worked closely with the Tata group, says the unanimity clause could prove tricky while finding Mistry’s replacement. “After all, everyone has a veto power,” he says.

Eminent lawyer and tax expert Homi P. Ranina says the resolution passed last October by Tata Trusts that all trustees would be appointed for life was done to avoid any uncertainty or dispute.

“Till then, all appointments were for a finite period. All trustees had unanimously agreed to that resolution,” he explains. Ranina clarifies that if that resolution has to be rescinded, it will necessarily have to go back to the trustees for their unanimous approval. “An appointment for life is the norm at every charity trust, and it is not unique to Tata Trusts,” he adds.

The Next Step

The potential legal challenge apart, there are questions that remain unanswered. Most important is the vacant position of a trust nominee on Tata Sons’ board.

According to Amit Tungare, Managing Partner, Asahi Legal, replacing Mistry is the discretion of Tata Trusts.

“There is a chance they may not even do it and retain the current structure. At this stage, it does not really matter nor is it bound by any kind of a deadline.”

With Mistry’s departure, Bombay House will look to get back to business devoid of distractions.

@krishnagopalan