Tata Sons Controversy: Ahead of the upcoming Annual General Meeting (AGM) of Tata Sons, the country’s largest business house is buzzing. Tata Trusts chairman Noel Tata has strongly opposed the holding company’s board’s decision to re-appoint N Chandrasekaran as director of Tata Sons. This mutual dispute has put the Tata Group’s operating companies in dire straits who will have to vote at the AGM. These companies are now confused whether to vote to support one of the parties or stay away from the entire controversy.

Companies facing a major religious crisis

Along with Tata Chemicals, big companies like Tata Motors, Tata Steel, Indian Hotels, Tata Consumer Products, Tata Power are currently facing the biggest challenge. Around 10 operating companies together hold 12.86 per cent stake in Tata Sons. The votes of these companies are considered very important in this complex math of shareholders. Officials of these companies believe that they are being unnecessarily dragged into a matter that is actually between Tata Trust and Tata Sons. Companies fear that if they vote, it will send a message to the market that they are supporting a particular group. Taking one side in such a situation can be tantamount to offending the other. For this reason, companies are avoiding taking any steps that directly affect the future of the group.

Chandrasekaran’s appointment issue

N Chandrasekaran joined the board of Tata Sons in October 2016. After this, he was made the Chairman in January 2017. Now his current tenure ends in February next year. Tata Sons’ board passed a resolution on September 17 re-electing him as executive chairman for the next five years. However, legally his continuation as chairman is entirely dependent on him retaining the position of director on the board. Noel Tata is opposing the matter. Since the Tata Trust holds a majority stake in Tata Sons, this opposition is of great importance.

Option to abstain from voting

Amid this controversy, experts believe that companies may also decide to abstain from voting. The founder of a large consulting firm said that the matter is very complex. If there is any misunderstanding in the market regarding voting, then companies will consider it better to abstain from voting. Companies also have to look after the interests of their investors. According to Uday Ved, an expert with a tax advisory firm, there will be only one vote but there is no clarity on how it will be viewed. A company has to be accountable to its stakeholders along with its growth. For operating companies, it is not only a matter of current voting but also a question of future tradition. If a company votes in favor of one party today, it will be expected to take the same stance in future disputes. No company wants to face the embarrassment of supporting one group.

The real reason behind the postponement of the AGM

Tata Sons’ AGM was initially scheduled to be held on August 18 but had to be postponed due to non-fulfillment of the quorum (minimum number of members). Maharashtra Charity Commissioner has imposed some restrictions on Sir Ratan Tata Trust (SRTT) to hold meetings or take decisions. Due to this, the joint representative of Sir Dorabji Tata Trust (SDTT) with SRTT could not attend the meeting. Following this hurdle, Tata Sons has received a three-month extension for a meeting with the Registrar of Companies. Now Tata Sons is looking for ways to convene the AGM as soon as possible.

For this, the door of National Company Law Tribunal (NCLT) can also be knocked. Under Section 97(1) of the Companies Act, the NCLT has the power to direct AGMs to be held by bypassing the normal quorum rules. If this happens, Tata Sons will be able to complete its meeting without a representative of the trust. Such controversies are rare in the history of the Tata Group. All eyes are now on whether Tata Sons will approach the NCLT or whether there will be a mutual understanding before the polls.