Mumbai: A debate is underway among some Tata Sons directors on how the board should formally respond to chairman N Chandrasekaran’s decision not to seek reappointment, people familiar with the matter told ET. Opinion is split on whether the issue be put to a vote at a board meeting, while some directors believe the board should not accept Chandrasekaran’s decision and rather ask him to reconsider, they said.
Sir Dorabji Tata Trust (SDTT), one of the two principal trustee shareholders of Tata Sons, is understood to have written to the Tata Sons board asking it to take note of his decision and suggested the start of the process of constituting a selection committee to identify his successor.
Chandrasekaran’s sudden decision not to offer himself for reappointment has jolted a section of the Tata Sons board, with the issue continuing to simmer among key stakeholders, people familiar with the matter said.
“Since the Tata Sons chairman has conveyed his decision to voluntarily not seek reappointment to the board, the fiduciary duty of the directors would be to focus on succession planning,” an official close to SDTT said.
The Tata Sons board comprises six directors, including two Trust nominees and the chairman.
Meanwhile, the Tata Sons AGM is scheduled August 18 (Tuesday), and while other stakeholders will likely join in the online meeting, given the inability of Sir Ratan Tata Trust (SRTT) to jointly nominate a representative with SDTT, it will be called off for want of quorum, officials said.
If the AGM, likely to be held in the afternoon, is called off, it would be a first in the history of Tata Sons. Amid the crisis, speculation is rife about separate meetings by Tata Trusts chairman Noel Tata and N Chandrasekaran with a cabinet minister in New Delhi.
Board-level voting on such matters as Chandrasekaran’s offer to exit is unusual and the board had almost come to a vote in February and June this year over the matter, officials said.
“A letter from SDTT does not bind Chandra to his statement about stepping down in February 2027,” said another official close to the development.
A director close to the matter said it is unlikely that Chandrasekaran’s decision will come to a vote because it is a personal decision taken by him.
“One can persuade or request him to reconsider, but such matters cannot come to a vote,” the official said.
Tata Sons and Noel Tata did not comment.
The developments come amid speculation that N Chandrasekaran was called to Delhi by a senior cabinet minister to reconsider his decision not to seek reappointment.
While it remains to be seen whether the board will ultimately vote on the matter, the discussions reflect the unease around a leadership transition that has unfolded more abruptly than some stakeholders had anticipated, the people said.
Ashish K Singh, managing partner, Capstone Legal, said board approval is not required for resignation, unless the Articles of Association of the company mention it.
“In my view, as per Companies Act, the Board has no option but to accept the decision of not seeking reappointment and accept the resignation,” Singh said.
Chandrasekaran had informed the Tata Sons board that he would not seek another term, citing the lack of unanimous support for his reappointment. The development came after a prolonged standoff over his proposed third five-year term.
