Tata Trusts rift widens as trustees challenge Tata Sons restructuring plan by mergers

A fresh governance dispute has emerged within the Tata Trusts after two senior trustees questioned the process behind a proposal to restructure Tata Sons through the merger of Tata Electronics Systems Solutions (TESS) and Tata Consulting Engineers (TCE) with the group’s holding company.

Sir Dorabji Tata Trust (SDTT) vice-chairmen Venu Srinivasan and Vijay Singh have written to fellow trustees expressing concern that the proposal was advanced without consultation with all trustees and without formal deliberation by the Trust. The letter, sent after Tata Trusts forwarded the restructuring plan to the Tata Sons board on September 28, also raised questions about a public announcement made in the name of the Tata Trusts.

The SDTT and the Sir Ratan Tata Trust (SRTT) together control over 50 per cent stake in Tata Sons.

Move to restructure Tata Sons

The proposed reorganisation is reportedly intended to transform Tata Sons from a predominantly investment-focused entity into a more operation-oriented company. By bringing TESS and TCE directly under Tata Sons, the holding company would acquire significant manufacturing, semiconductor, engineering and consultancy operations. Such a structure could alter Tata Sons’ regulatory profile and potentially move it outside the framework that led the Reserve Bank of India (RBI) to direct a listing process.

Also read: Tata Trusts proposes Tata Sons rejig to remove need for stock-market listing

Srinivasan and Singh argued that a move of such magnitude could have far-reaching implications for Tata Sons, the Tata Trusts, and a broad range of stakeholders, including group companies, employees and regulators. They maintained that the legal, financial, commercial and governance consequences deserved detailed examination before any position was taken on behalf of the Trust.

Trustees unaware

The trustees said they became aware of the proposal and the accompanying public communication only through external sources and contended that no SDTT meeting had been convened to discuss the matter. According to their communication, it remains unclear whether the proposal reflects the collective position of all trustees.

Their concerns also extend to the manner in which the proposal was presented to Tata Sons. The letter questions whether a shareholder should urge a company board to approve a specific course of action when the board is legally required to exercise independent judgment. The trustees argued that the Tata Sons board should be allowed to evaluate the proposal on its own merits, including its regulatory, financial and commercial ramifications.

SRTT restriction adds to complication

Another issue flagged by the pair relates to the charitable status of the Trusts. They cautioned that communications perceived as directing corporate decision-making, rather than exercising shareholder rights, could invite scrutiny.

Also read: Tata Sons at a crossroads: RBI listing, Chandrasekaran’s term

The debate has also been complicated by regulatory restrictions affecting the SRTT. According to the trustees’ letter, an order of the Charity Commissioner has limited SRTT’s ability to hold meetings and take decisions, prompting questions about how approvals for a proposal of this scale could be obtained.

Consensus elusive

The dispute comes against the backdrop of wider differences within the Tata Group over the future of Tata Sons. At a board meeting on September 17, Tata Sons reportedly voted by a 4-1 majority to proceed with steps related to a potential listing process in line with regulatory requirements. Chairman Noel Tata was the lone dissenter, while Harish Manwani, Anita M George, Venu Srinivasan, and Saurabh Agrawal supported the move.

The restructuring proposal was publicly defended earlier by Tata Trusts adviser and Tata Sons veteran Farokh Subedar, who said the Trusts were exploring ways to keep Tata Sons unlisted (privately held) and had authorised the chairman, that is Noel Tata, to pursue solutions. However, the latest objections from Srinivasan and Singh indicate that consensus within the Trusts remains elusive.