Deferment of Chandrasekaran's reappointment as Tata Sons' boss to have several implications

The reappointment of N Chandrasekaran as Chairman, Tata Sons, being deferred, could have several implications. Chandrasekaran took charge of the position in February 2017 and was initially appointed for five years, before that was renewed in 2022 for another five years.

Also read: Tata Sons puts N. Chandrasekaran’s reappointment on hold after board differences: Report

The board meeting held in February, according to sources, saw Noel Tata, Tata Sons' board member and Chairman of Tata Trusts, raise concerns over mounting losses in new business forays.

Those close to the group say that Noel Tata raising questions is critical given that his position as Tata Sons’ director is by virtue of being a representative of Tata Trusts, the other being TVS Motors’ Venu Srinivasan.

Tata Trusts, of which Noel Tata is Chairman, owns close to two-thirds of Tata Sons, the holding company of the diversified $180 billion conglomerate. According to media reports, Tata outlined four conditions for Chandrasekaran’s reappointment: Tata Sons should not be listed, it should have no debt, limit high capex in high-risk investments, and contain losses from buyouts like Air India and Big Basket.

An email sent to Noel Tata did not elicit a response at the time of filing this story.

Eminent tax lawyer Homi Ranina says it is unfortunate that the process of reappointment of N Chandrasekaran as Tata Sons’ Chairman has not gone through. "It should have taken place in the interest of both continuity and good governance. This will create doubts in the minds of people on the future of the group and its businesses," he thinks.

For Chandrasekaran's reappointment, the Tata Sons’ board will have to reconvene. The interesting part is that his tenure in the current position remains till February 2028.

"The question remains as to why the meeting for reappointment was called so early," says Ranina. How the issue starts to play out now is unclear. "In the event of Chandrasekaran not being reappointed, the process of looking for an alternative will need to start, and that will be time-consuming, leading to more uncertainty. We have seen how long it took to decide on Cyrus Mistry as the successor to Ratan Tata,” he adds.

Amit Tungare, Managing Partner at Asahi Legal, maintains that the issue of Chandrasekaran’s reappointment could look at renegotiation of several areas, such as tenure and performance.

"The current development around the deferment of the reappointment can be viewed as a signal to look for a successor," he says.

According to Ranina, any disagreement before the reappointment should have been discussed before the board meeting. "While unanimity is not always possible, nothing is more important than the group’s interests. There is no doubt consensus is necessary, but a decision of this nature should also be driven by principle and not always by majority," he says.