Tata Sons-Trusts battle: When Justice Nariman said nominee directors not bound by Trusts' directions

An April 2025 legal opinion by former Supreme Court judge Justice RF Nariman has resurfaced amid the latest governance dispute between Tata Sons and Tata Trusts.

The opinion dealt with whether directors nominated by Tata Trusts could be required to follow the Trusts' directions when voting on Tata Sons board resolutions.

Justice Nariman said nominee directors must exercise their own independent judgment while discharging their duties as company directors, according to a report by news agency ANI.

The opinion, dated April 13, 2025, came while Justice Nariman was examining a proposed protocol for directors nominated by Sir Dorabji Tata Trust and Sir Ratan Tata Trust.

The protocol proposed that the nominee directors consult the Trustees on certain Tata Sons board resolutions and then vote or abstain in line with the guidance they received.

Justice Nariman found that such an arrangement would conflict with the directors' statutory duties under the Companies Act, 2013.

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What was the protocol?

The protocol followed a resolution passed by the two Trusts on October 17, 2024.

Under it, nominee directors dealing with resolutions concerning specified provisions of Tata Sons' Articles of Association would consult the Trustees before voting. They could also be asked to raise resolutions before the Tata Sons board.

The protocol said the Trustees could immediately review whether a nominee director's nomination should be withdrawn if the director did not vote, abstain or otherwise act in accordance with the Trustees' guidance or request.

Justice Nariman examined the arrangement under Section 166 of the Companies Act, which sets out directors' fiduciary duties.

These include acting in good faith in the interests of the company and its stakeholders and exercising due and reasonable care, skill, diligence and independent judgment.

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What justice Nariman said

Justice Nariman also relied on the SC's March 26, 2021 judgment in TCS Limited v. Cyrus Investments Pvt. Ltd. and Others. The judgment had considered, among other issues, the position and duties of directors nominated by charitable trusts.

Justice Nariman said an institutional shareholder having a view on how its nominee directors should vote could not mean that the directors were stripped of their independent judgment.

"An idea about the stand to be taken by the nominee directors cannot be stretched to mean that the nominee director is only allowed to voice the stand of the Trustees of the Trust and cannot exercise any independent judgment," he was quoted as saying by the news agency.

He added that a nominee director could consider the Trustees' views while also applying his own judgment.

"He can voice the opinion of the trustees together with applying his mind to other relevant matters, including his fiduciary obligations to the company of which he is a director," Justice Nariman said.

The justice concluded that requiring a nominee director to strictly follow the Trustees' guidance, with the possibility of removal for failing to do so, would be contrary to the statutory requirement of independent judgment.

"It is my opinion therefore that this Protocol would be contrary to the law, i.e. the Companies Act 2013 and the aforesaid Supreme Court Judgment dated 26 March 2021," Justice Nariman said.

Why it matters in the current row

The opinion predates the current dispute between Tata Sons and Tata Trusts, but it addresses a related question: the difference between the Trusts' rights as shareholders and the duties of directors nominated by them once they join the Tata Sons board.

The latest dispute centres on decisions taken at Tata Sons' September 17, 2026 board meeting.

The board approved N Chandrasekaran’s reappointment as chairman for another five years and moved towards a stock market listing.

Noel Tata, chairman of Tata Trusts and one of the Trusts’ two nominee directors on the Tata Sons board, opposed the decisions. The other nominee director, Venu Srinivasan, supported them.

Tata Trusts later challenged the validity of Chandrasekaran's reappointment. It argued that Tata Sons' Articles of Association require the affirmative support of a majority of the Trust-nominated directors.

With only two Trust nominees on the board, the Trusts contend that both must vote in favour for the requirement to be met.

Tata Trusts, which holds about 66% of Tata Sons, has therefore said the September 17 resolution had no legal effect.

Justice Nariman's opinion does not directly settle that issue. It dealt with whether Tata Trusts could require its nominee directors to vote in line with instructions from the Trustees.