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Abhishek Singhvi, five term member of parliament and senior lead counsel for Tata Trusts, told Saubhadra Chatterji that the fundamental issue in the Tata Trusts vs Tata Sons imbroglio is that the rights of shareholders and owners cannot be nullified. And, the larger issue, he said, is the 100-year legacy of the Tata group and the rupturing of the fundamental hyphenated relationship between Tata Trusts and Tata Sons.
In 2016, you fought the case between the Tata group and Cyrus Mistry. Now you will fight the Tata Trusts versus N Chandrasekaran case.
I know each of the principal actors in this controversy personally. I also have the highest regard for them. But there is no option but to appear for one side.
What is the fundamental issue in this legal battle?
The fundamental rights of shareholders and owners cannot be nullified. This is not a fight between two or three individuals or companies or entities. It is a larger fight concerning shareholders and owners’ primacy.
Also Read: Tata Sons’s move to grant Chandrasekaran another term short of shareholder math: A look at numbers
No one can deny the 66% ownership of Tata Sons by Tata Trust. You cannot allow corporate governance to be turned on its head by a runaway board excluding the owners of the entity on whose board they sit. It raises a larger question for every shareholder and would have a disastrous effect on larger principles of corporate governance if shareholder ownership could be nullified in this manner.
But the Board of Tata Sons has reappointed Chandrasekaran through a majority vote.
The issue here is the meaning, effect and application of a very small number of articles especially Articles 121 and 118. A 66% shareholder is empowered to pack the board with its nominees. But Tata Trusts decided to cede much of that ownership by only insisting on a minimum of one-third board nominees whereas normal shareholder rights would entitle them to much more on Tata Sons.
But to protect their sharing, a provision was made in article 118 for an affirmative vote—another form of a veto to protect their large shareholding. Article 118 says is that any decision of the board requiring voting must involve at least a majority of the trust nominees’ affirmative assent. Since there are two out of six trust nominees, no board agenda can be considered unless there is the assent of a majority within the two Tata Trust nominees.
Also Read: Noel Tata vows to veto IPO listing, seeks 3-yr window from RBI: ‘If I’m forced to vote…’
It does not require rocket science to realise that a majority within two is, in fact, two. Consequently, the moment Noel Tata dissented, there was no question of anything proceeding further because the board is denuded of jurisdiction to even consider the issue, much less vote on it under the specific language of Article 118.
What about the casting vote?
The casting vote arises when the entire board faces a tie or a deadlock amongst all six members. That will happen only if the majority of the trust nominees agree with the issue on which the vote is being taken. The moment Noel Tata expressed his disagreement, the issue could not go to the board at all and consequently could not be voted upon by the board; thus, there could be no occasion for the casting vote to arise.
Why do you think the four members sidestepped Article 121?
Knowing the law is never an antidote against wrongdoing.
Wrongdoing occurs because of predetermination to reach a result. That is the best answer one can give in view of the elementary text of the article. The bizarre part of the whole process is that there is a separate, detailed article—namely 118—which comprehensively stipulates the entire process to select the chair. The bare text makes it clear that the selection committee for the chairman gives primacy to trust decision making.
Also Read: ‘Illegal, strong objection’: What Noel Tata said on N Chandrasekaran’s ‘controversial’ reappointment at Tata Sons
It requires three persons nominated jointly by both trusts, one board member of Tata Sons and one outside independent person selected by the Tata Sons board to comprise the five-member selection committee, which alone can select the chairman. The moment Mr. Chandrasekaran expressed his view to step down, that process was initiated, but has now sought to be aborted by a process unknown to the articles or to law.
But the Tata Sons board urged Chandrasekaran to reconsider his position.
Since the board, without any selection committee, without any process of selection, has re-elected the chairman, this is yet another article destroyed by observance in the breach.
There is this delicious mystery about a sudden out-of-the-blue prior freeze by a third-party non-participant, non-disputant charity commissioner who puts on hold the meeting or even the convening of a meeting of the Ratan Tata Trust. This inexplicable, sudden and mysterious stranglehold on trust functioning therefore ensures that the trust cannot meet either to jointly nominate the selection committee of three persons, but more importantly to nominate anyone else in place of a person in whom they have lost confidence
By this sudden, simple and mysterious stranglehold of the charity commissioner, that process is entirely stymied and reinforces the larger plan where the 66 % shareholder is paralysed.
What might be the possible impact on the Tata legacy?
The larger issue in this imbroglio is the 100-year legacy, the rupturing of the fundamental hyphenated relationship between the Tata Trusts and Tata Sons.
People do not realise this destroys the vision of the founder of the entire Tata family and the very concept of the Tata commercial enterprise, which is unique in India.
Not only would all receipts of Tata Trusts from their holdings go to hospitals, universities, scholarships, research, etc. and other similar activities, but the philanthropic perspective would also control policymaking by holding 66% in Tata Sons, which in turn controlled the operating companies. Rupturing this hyphen and implementing the divorce between Tata Trusts and Tata Sons is not only unthinkable but would make Jamsetji Tata turn over in his grave.
