The existential dilemma, or moral dilemma, plays out, much like in the context of Tata Trusts, which control a 66% stake in Tata Sons. In modern times, it simply becomes a legal issue: Between the State that promises justice and the rule of law and a private group that wants to preserve its “unique” culture (read: old-world control).

Listing Dilemma

The RBI wants Tata Sons, as an “upper layer” non-banking financial company, to mandatorily list on the stock exchanges because its assets total more than ₹1 lakh crore: it is well above the “too big to fail” kind of entities classified as systemically important companies, although it is not a bank or insurance company. But the size itself is something that invites regulatory supervision, especially when the unlisted company holds sway over a slew of companies listed on stock exchanges.

Much like children who suffer when parents fight, shares of Tata companies are falling the day after Tata Trusts Chairman Noel Tata publicly crossed swords with the Board of Tata Sons over the reappointment of N. ‘Chandra’ Chandrasekaran as Chairman. Chandra’s “blow-out-blow-in” return as Tata Sons Chairman, after quitting earlier on the ground that his nomination was not unanimous, goes against the Tata culture known for “soft-touch sophistication”.

Such Are The Times

When power struggles happen, veneers of sophistication become less affordable for the rich and the mighty.

It is a moment of truth for all. A private charity, how much ever noble its intent, cannot escape the demands of public accountability when its assets indirectly stretch into the realms of millions of minority shareholders and investing institutions.

Businesses are becoming bigger. Shareholding is becoming wider. Publicly listed companies must disclose adequately and hold themselves accountable to minority shareholders, even if their controlling entities technically hold majority stakes. These nuances are a tangible counter to Noel Tata’s self-image as a custodian of culture. This is where the Tata tussle is also a test case for India’s “promoter capitalism”, in which family groups control public entities, often in opaque ways.

Noel Tata, who wants to “engage” with the RBI, wants a personal solution while being part of a national problem. The RBI regulation goes back to 2022; and a year after the expiry of its deadline for the listing of Tata Sons, what we see is a bleeding deadlock.

Power Balance

The Parsi trusts controlling the Tatas, understandably, feel themselves in a bind, like a head suddenly declared to be a tail. What is shaky now is a unique arrangement through the Tata Sons articles of association, under which the trusts appoint one-third of the directors and hold veto powers over key decisions.

In the current tussle, Venu Srinivasan of the TVS Group, who was nominated by the trusts to the Tata Sons Board, appears to be acting with a sense of duty towards the chair he currently occupies, and not guided by loyalty to those who put him there. It is a case of loyalty pitted against duty, and charity pitted against management strategy. One article of association enables the structuring of Tata Sons’ Board while another enables voting rights to nominee directors.

In openly challenging Noel Tata, Tata Sons’ Directors are doing what they think is “best for ALL” of their shareholders, not just the ones who represent 66% of the stake.

The 4-1 decision to re-appoint Chandra as Chairman is deemed by Noel Tata as “illegal” because it goes against a flimsy article of association. It is indeed strange when a UN-like veto challenges commonly accepted practice of corporate law. This is probably the core issue in a likely court battle.

More importantly, the way the whole thing is being defined, it seems more like a power struggle than the horns of a dilemma between the goals of a charity and ways to fund it.

Trust Divide

In the backdrop is a story that looks like an episode from the epic Mahabharata. The Shapoorji Pallonji Group, which owns an 18.4% stake in Tata Sons, backs a public listing as it would be an occasion for it to cash out of an uneasy, lifeless corporate marriage going back exactly a century ago. Understandably, the group wants the listing that it sees as a “social and moral imperative.”

Ironically, the Tata Trusts sees its desire to stay away from listing with the same pair of eyes. Noel Tata’s statement reflects this: “What makes the Tata operating structure unique is that it is premised on trust, and its majority shareholder is a charity. That charity funds hospitals, universities, and research from the dividends it receives. It exists for public purpose and for nation-building.”

What we will probably see in the coming days is a round of lobbying in the government and the RBI, as well as courtroom tussles. But what should be clear is that private entities cannot stand above public law. As a strange beast with its head in noble causes and legs in shareholder value, the Tata Group must decide if it wants a fruitful relationship or devotional loyalty. 

(The writer is a senior journalist covering a diverse range of subjects, including economy, technology, and politics. Views expressed are personal.)