N. Chandrasekaran's reappointment challenged: What the Articles of Association say

A fresh governance dispute has emerged at Tata Sons after Tata Trusts challenged the board resolution seeking to reappoint N Chandrasekaran as chairman, arguing that the decision does not comply with the company’s Articles of Association. The Trusts maintain that specific provisions require both Trust nominee directors to be present and vote in favour of a chairman’s appointment or reappointment.

At the Tata Sons board meeting on September 17, Tata Trusts Chairman Noel N Tata reiterated that Chandrasekaran’s decision not to seek another term had already been accepted and should be treated as final. Chandrasekaran had communicated his decision to the board on August 12, saying he would not offer himself for reappointment when his current tenure ends on February 20, 2027.

What do Tata Sons’ Articles say?

According to the Tata Trusts’ statement, the Articles of Association lay down a specific process for appointing the chairman of Tata Sons. The Trusts argue that this provision applies not only when a chairman is appointed for the first time but also when an existing chairman is being reappointed.

The Trusts’ interpretation is that both nominee directors representing the Trusts must be present at the board meeting considering the appointment or reappointment. More importantly, both nominee directors must vote in favour of the resolution for it to be valid.

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At Thursday’s meeting, four directors voted in favour of Chandrasekaran’s reappointment, while Noel Tata voted against it. Based on its interpretation of the Articles, Tata Trusts said the resolution was therefore a “legal nullity” and had no valid basis.

The Trusts also maintain that the board could not lawfully consider the chairman’s appointment or reappointment without both Trust nominee directors being present.

Why Tata Trusts oppose the reappointment

Tata Trusts said Chandrasekaran’s August decision was “freely taken” and had been publicly communicated before shareholder deliberations. The Trusts formally accepted the decision the following day and advised Tata Sons to begin the process of constituting a Selection Committee to identify his successor.

According to the Trusts, employees, lenders, counterparties, the market and the majority shareholder had subsequently proceeded on the basis that a leadership transition would take place. It therefore argues that the decision cannot subsequently be reversed.

Noel Tata also submitted a legal opinion obtained from former Chief Justice of India Justice DY Chandrachud supporting the Trusts’ position, according to the statement. The Trusts said the opinion was not taken note of by the Tata Sons board.

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Selection process to continue

Despite the board resolution, Tata Trusts said it remains committed to an “orderly and timely leadership transition” and that the Selection Committee will proceed in accordance with Tata Sons’ Articles of Association.

The immediate dispute therefore centres on the interpretation and application of Tata Sons’ Articles, with the Trusts maintaining that the September 17 resolution failed to meet the requirements they say are prescribed for a valid chairman reappointment.

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