The 158-year-old electronics-to-retail Tata empire operates in over 100 countries. It owns brands like Air India, Tetley tea and Jaguar Land Rover, runs Indian joint ventures with Starbucks and Inditex’s Zara, and makes parts for Tesla and Apple, so the fight for control has ramifications well beyond India.
This month, the six-member board of Tata Sons, the group’s holding company, reappointed chairman N. Chandrasekaran despite objections from the Noel Tata-led Tata Trusts, the charity arm that owns 66% of the conglomerate. During the September 17 meeting, the charity’s boss Noel Tata also argued against Tata Sons’ potential stock market listing, but the board overruled him.
The charity has publicly lashed out, saying the internal governance rules explicitly state that Noel Tata’s lone vote against any key decision is enough to sink it. Tata Sons disagrees, saying Noel lacked the support of the other trust nominee, and so the decision was taken based on a simple majority.
The governance clash is raising the alarm among Indian companies about how far a board can go to overrule a majority shareholder.
Strategic investors, company owners and directors in sectors such as manufacturing, steel and textiles are reviewing their shareholder agreements to check they have enough protection to prevail if a boardroom battle erupts, according to nine lawyers and board directors.
”We have received multiple queries from business families and founders on the issue related to the management versus owners debate,” said Rajesh Narain Gupta, chairman of law firm SNG & Partners.
”It has raised a sense of insecurity and fear among owners.”
In one case, a Delhi-based lawyer who specialises in mergers and acquisitions, who spoke on condition of anonymity, said an Indian manufacturer and its European joint-venture partner were close to signing off on a shareholder agreement when the investor called a halt citing the Tata dispute, asking for extra safeguards.
The lawyer declined to name the companies due to confidentiality concerns.
The current dispute has prompted strategic investors and private equity funds who have veto rights in a company to check if they can be diluted if the boards read governance frameworks differently, said Parag Bhide, partner at Indian law firm Aquilaw.
”The question clients are asking is whether a board can proceed with a decision first and leave the shareholder to seek remedies later,” said Indian M&A lawyer Nitin Potdar, who has previously advised the Tata Group.
”Will the owner be the one who then has to run around for remedies?”
Unique structure
Founded by Jamsetji Tata in 1868, the Tata Group is made up of 31 companies which had revenues of over $180 billion last year. The group’s principal holding company is called Tata Sons, and 66% of its equity share capital is held by the philanthropic arm, Tata Trusts.
Before becoming head of Tata Trusts, Noel Tata, who is the half-brother of family patriarch Ratan Tata, who died in 2024, built Tata’s retail and trading businesses.
Tata Sons’ stated governance philosophy, published on its website, holds that companies must be run ”not merely in the interests of their owners” but also for employees, customers, the local community and the country.
To be sure, Tata’s unique governance structure and the principles behind it are the exception to most Indian companies. And this is not the first time it has led to high-profile conflicts — in 2016, the then chairman was sacked after he fell out with Ratan Tata over corporate governance issues, triggering years of legal disputes.
”The stand-off at Tata Sons is a result of the Tata Trusts’ limited board representation (of two members),” said Umakanth Varottil, a professor at the National University of Singapore who specialises in corporate law and governance.
”That combination of majority ownership, limited board representation and divided nominee directors is unlikely to be replicated in many companies,” he added.
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