[Umakanth Varottil teaches and researches in corporate law and governance]
On 24 October 2016, Tata Sons, the holding company of the sprawling eponymous conglomerate, fell into turmoil upon the removal of its then chairman Cyrus Mistry at the instance of the company’s controlling shareholders, the Tata Trusts, led by Ratan Tata. Close to a decade later, another leadership contest erupted on 17 September 2026 with the company’s board of directors having renewed N. Chandrasekaran’s term for a further period of five years when his current term expires in February 2027. What makes this intriguing is that the decision comes despite the sole resistance of Noel Tata, representing Sir Dorabji Tata Trust and Sir Ratan Tata Trust (the Tata Trusts), which are the controlling shareholders of Tata Sons, holding nearly 66 percent shares in the company. This has not only led to a classic conflict between the controlling shareholder and the board of directors, but it has also given rise to some unique corporate law and governance issues that are sure to exercise legal minds.
Background to the Tata Sons Board Decision
A word about the dramatis personae involved in the corporate battle. The Tata Sons board comprises six directors: N. Chandrasekaran, the Executive Chairman, and five others directors, namely, Venu Srinivasan, Noel Tata, Harish Manwani, Anita George, and Saurabh Agrawal. Of these, Venu Srinivasan and Noel Tata are nominated by the Tata Trusts.
Chandrasekaran has been the chairman of Tata Sons since 21 February 2017 and is currently serving his second five-year term. Due to a possible stalemate regarding his reappointment after his second term, Chandrasekaran on 12 August 2026 informed the Tata Sons board of his decision not to offer himself for reappointment, which was also made public. However, in a dramatic turn of events, on 3 September 2026, the Nomination and Remuneration Committee (NRC) of Tata Sons sought to revisit the leadership question and, after requesting him to reconsider his earlier choice, unanimously decided to recommend the reappointment of Chandrasekaran to the position of executive chairman.
On 17 September 2026, the matter was taken up by the Tata Sons board, whose decision was not so straightforward. Chandrasekaran’s reappointment for a five-year term was put to vote, with the chairman himself abstaining. The proposal was approved by a 4:1 majority, with Noel Tata voting against it. Separately, the Tata Sons board also decided to move in the direction of compliance with certain directions of the Reserve Bank of India (RBI), which include the need to list the company’s shares on the stock exchange. Again, Noel Tata’s was the sole dissent.
These decisions have spiralled into a sharply contested legal controversy, especially given the discord on the board represented by Noel Tata’s negative vote. The ultimate outcome would depend upon the validity of the decisions taken at the 17 September board meeting.
Articles of Association and the Validity of Board Decisions
The main bone of contention relates to whether the decision to reappoint Chandrasekaran is compliant with the articles of association of Tata Sons, in particular Article 121, which reads as follows:
121. Matters How Decided.
Matters before any meeting of the Board which are required to be decided by a majority of the directors shall require the affirmative vote of a majority of the Directors appointed pursuant to Article 104B present at the meeting and in the case of an equality of votes the Chairman shall have a casting vote.
This article has been extracted from the Supreme Court ruling in Tata Consultancy Services Limited v. Cyrus Investments Pvt. Ltd. (2021) (on page 209). Two primary issues and an ancillary one have emerged in the present context: (i) whether there has been a valid exercise of the affirmative vote by a majority of the nominee directors of Tata Trusts; (ii) whether Article 121 applies to both appointment and reappointment of the chairman, or only to the former; and (iii) whether the decision by Chandrasekaran, communicated to the Tata Sons board on 12 August 2026 to step down as chairman at the end of his current term, precludes him from revisiting that and putting himself up for reappointment.
Affirmative Votes
Article 121 of Tata Sons’ articles of association requires majority board decisions to be accompanied by another condition, which is that it has the affirmative vote of a majority of the directors nominated (in terms of Article 104B) by the Tata Trusts. The nub of the issue here is that the two nominees of the Tata Trusts voted differently, with Venu Srinivasan in favour of the Executive Chairman’s reappointment and Noel Tata against.
The further question, therefore, is whether a casting vote of the chairman can break the stalemate in terms of Article 121. The protagonists of the chairman’s extension argue in favour. They rely upon the positive vote of Harish Manwani, the long-serving independent director of Tata Sons and also the chairman of the NRC, who presumably had to temporarily assume the chair in view of Chandrasekaran’s recusal from participating in the decision-making relating to his own reappointment.
On the other hand, Noel Tata, armed with an opinion from Justice D.Y. Chandrachud, has taken up the cudgels by asserting that the affirmative right exercisable by a majority of the Tata Trusts nominee directors is non-negotiable and that it is separate and independent of the casting vote, which relates to deadlock at the full board level and not between the two nominee directors.
The interpretation of Article 121 and the difference of approaches adopted by the warring factions is likely to constitute the core of any litigation that may arise challenging the 17 September board decision. A few preliminary observations are in order, and it might all boil down in the end to semantics.
First, since Article 121 refers to the casting vote, a determination of the scope of the corporate constitutional provision matters a great deal. If it relates to both board decisions as a whole and also affirmative rights, what one may refer to as a “double barrel majority requirement”, then it is possible to subscribe to the view canvassed by Noel Tata that the casting vote would be a tiebreaker for the board as a whole and not for a deadlock between the two nominee directors. However, a contrary view would be that Article 121 refers only to the affirmative rights of the nominee directors only and, therefore, does not necessarily encompass the double barrel majority. This is consistent with the textual analysis of the provision, which is capable of an “if/then” interpretation: if the decision requires a full board majority, then it also requires an affirmative vote by a majority of the Tata Trusts nominee directors. Adopting this interpretation would suggest that the sole purpose of Article 121 is to provide for an affirmative right (rather than including decisions of the entire board), in which case the casting vote would naturally be employed to break a deadlock between the two Tata Trusts nominees, as occurred in the present instance. Going purely by the text of Article 121, the “if/then” interpretation appears to be more convincing than the double barrel majority interpretation.
Second, and assuming an “if/then” interpretation, there is a level of oddity in the casting vote mechanism prescribed in Tata Sons’ articles. Normally, when there is a tie, say among the directors, the casting vote is conferred upon one of the constituents of the body making the decision. That is why the casting vote is referred to as a “second” vote: see Article 68(ii) in Table F in Schedule I to the Companies Act, 2013. What stands out with Article 121 of the Tata Sons articles, and how it has played out on this occasion, is that where there is a difference of opinion between the Tata Trusts nominees, the casting vote fell upon someone who is not an original decision-maker whose vote led to the tie in the first place. Specifically, a tie between Srinivasan and Tata was not resolved by a casting vote of one of them but rather a third person, being Manwani. This introduces an additional layer of complexity as to the validity of the casting vote.
Although the discussion about the affirmative rights and casting vote are in the context of the decision to reappoint the chairman of the company, similar issues would arise regarding the decision to comply with the RBI guidelines and to list the company because, even here, Noel Tata voted against the decision as one of the nominees of the Tata Trusts. The only difference on this decision is that the so-called casting vote would have been exercised by Chandrasekaran as the chairman, as he was not required to recuse himself on this matter.
Appointment/Re-appointment
Another question that has come up for consideration is whether the process for the appointment of the chairman enshrined in Article 118 of Tata Sons’ articles (extracted by the Supreme Court in Tata Consultancy Services Limitedon pages 158-59) applies only to fresh appointments of a new chairman or whether it even applies to the reappointment of an existing chairman. One view asserted is that since Chandrasekaran has already served two terms and whose tenure is only being extended, the procedure stipulated in the articles of association need not be followed. However, such an approach is difficult to sustain as any appointment of a person to a board position, that too as chairman, is for a term and, upon expiry thereof, the process for appointment for a further term should be complied with in full. Failing that, the procedure stipulated in Article 118 would be rendered otiose.
Change of Heart
Noel Tata has raised the point that since Chandrasekaran wrote to the Tata Sons board on 12 August 2026 of his intention not to renew his term, which was subsequently placed in the public domain, the issue has reached the point of no return. This is because the board, the majority shareholders, and other stakeholders, such as employees, lenders, contracting parties, and the market, have already acted on the basis of a prospective leadership change that cannot now be reversed.
Appealing as it may be from a conceptual standpoint, it would be difficult to sustain this argument from a legal point of view. A director is entitled to revisit a decision made to step down before the date actually occurs. Merely because the announcement was made publicly, the chairman cannot be prevented (or estopped) from effecting a change of heart and re-running for the post, subject to completion of the process. Hence, the legalities of the reappointment are likely to be driven more by the validity of the voting process on the board of Tata Sons, especially in view of the affirmative vote requirement of the Tata Trusts nominee directors, much less, if at all, will turn on the change of heart on the part of Chandrasekaran.
[Continued in Part II]
– Umakanth Varottil
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