Tata Affair And The Search For Corporate Conscience

We are in for a prolonged legal battle in L’affaire Tata. Reconciliation between the warring factions seems out of the question. The matter is already with the lawyers and will soon reach the courts.

The facts need no repetition. Given the stakes and the high profiles involved, the matter has unsurprisingly attracted much commentary from experts and laypersons alike. Amid the hand-wringing, discussions on the rights and wrongs of the protagonists and the relative strengths of their legal positions, one omission stands out – the conduct and character of the parties involved, all the more so given that we are not talking about any company but an institution with a century-old legacy that has earned a reputation for exemplary conduct and stewardship.

Let us rewind to the ouster of Cyrus Mistry, for that is where doubts about the exemplariness started to creep in. Given that decisions involving capital allocation, business strategies of the operating companies, investments and divestitures, and appointment of key personnel all had to have the consent of Tata Trusts, acting through its representatives on the Board of Tata Sons, it was clear that the Board was merely ornamental and ceremonial.

And when the key representative of the major shareholder was a person of the stature of Ratan Tata, this was doubly so. The manner of Cyrus’s ousting for daring to be his own man was the first indication that governance at the highest level was not what it seemed.

The second indication was the absence of an exit route for the largest minority shareholder, Shapoorji Pallonji. Not only would Ratan Tata exercise effective control over Tata Sons and, through it, the operating companies, but he also appeared unconcerned about providing his significant minority shareholder the liquidity it needed, given its pile of costly debt.

The third signal was the conduct of the members of the Tata Sons’ Board. Every one of the directors had gone along with Ratan Tata in agreeing that Tata Sons ought not to be listed. It has been reported that the Board concluded unanimously in March 2024 (when Ratan Tata was still alive) that the company should remain unlisted. The Trusts (the majority shareholder in Tata Sons) followed suit in July 2025.

In an inexplicable volte-face, the same directors who had unanimously concluded in 2024 that Tata Sons ought not to list have now changed their minds and want the company to do so! What has changed between then, apart from the passing of the venerable Ratan Tata? What has caused them to change their minds? Were they always in favour of a listing but too overawed by Ratan Tata to disagree with him? Or is it the RBI’s epistle effectively asking Tata Sons to list?

The most egregious conduct is Chandrasekaran’s. In addition to his U-turn on the listing, he did another somersault. Having initially decided not to seek reappointment on the expiration of his term in February 2027 on the ground that there was no consensus within the Board for his reappointment for a third term, he has now agreed to his (contested) reappointment even though the lack of consensus persists, with Noel Tata continuing to hold out!

What of the RBI? Are we to believe that discussions on the listing continued well after Ratan Tata’s passing, or conclude that, like the directors of Tata Sons, it too waited for Ratan’s passing and took the opportunity after that event to make clear its stand? Why did it take so long for it to come to its conclusion in the matter?

We now come to Noel Tata. The first indication that he would not support Chandrasekaran’s reappointment came when it was reported that he had wanted Chandrasekaran to produce a roadmap to profitability for the loss-making operating companies in the Group. This implied that he was drawing back from giving his support automatically.

In the normal course, he would have been justified in thinking that without his support, Chandrasekaran could not be reappointed. A replacement for Chandrasekaran could hardly be expected to produce the glide path to profitability Noel wanted, given the complexities involved. It is therefore clear that this was a fig leaf and the real reason for his not wanting Chandrasekaran was the latter’s revised stand on the listing.

It is clear that none of the parties involved has come out smelling of roses in this sordid and unfortunate affair. Ultimate resolution by the courts of all the issues that have arisen would have far-reaching implications for the Tatas and everyone concerned but would also be a Pyrrhic victory.

For what is at stake, beyond the legal technicalities, the listing, a way out for Shapoorji Pallonji, the roles of the Trusts relative to the Board of Tata Sons, the interpretation of the relevant provisions of the Articles of Association of the company and so on, are fairness, intellectual integrity, courage of conviction and right conduct, all of which appear to be in short supply. On the restoration of these vital intangibles will depend the continuation of the Tata legacy.

(This article is authored by Sankar Ramamurthy, Consultant, Vidhi Centre for Legal Policy. Views expressed are personal.)