Why Chandrasekaran Had to Buckle Under Noel Tata's Pressure

N Chandrasekaran will not be putting himself forward for reappointment as the chairman of Tata Sons, the holding company of the salt-to-semiconductor conglomerate. The 63-year-old communicated his decision not to seek a third term in a letter on Wednesday. He also asked the Tata Sons board to decide on his succession plan.

Chandrasekaran's decision brings an end to a six-month stalemate over his reappointment, which had been held up by reported reluctance from Noel Tata, Chairman of Tata Trusts. Tata had refused to move along the recommendation for Chandrasekaran's reappointment, seeking a plan from him to turn around loss-making businesses of the group, including Air India, and assurances that Tata Sons would be kept private.

"It has been 6 months since that Board meeting, and no resolution has been reached till date. Tata Sons is a very large institution and there are many strategic projects that are under critical stages of execution. It is not only necessary to have a leader in place to lead the Group beyond Feb 2027, but also clarity on leadership is important for employees, investors, partners and other stakeholders," Chandrasekaran wrote on Wednesday, according to MoneyControl.

Though the above may have been the overarching issue that led to Chandrasekaran's resignation, a brewing internal conflict among the trustees of Tata Trusts, along with regulatory pressure from the Maharashtra Charity Commissioner, also played a key part in his ultimate decision to step down.

The public charitable trusts, which own a majority 60% of the shares of Tata Sons, had been facing internal conflicts over the trusteeship since last year. It spilled outside as the Maharashtra Charity Commissioner barred a Sir Ratan Tata Trust (SRTT) from holding board meetings over alleged violations of public trust laws.

It created an issue of quorum at the trusts, which was expected to decide on Chandrasekaran's reappointment as director of the holding company during Tata Sons' next Annual General Meeting, expected on August 18. But even before the issue could be resolved, Tata Sons Chairman has decided to retract his candidature.

Noel Tata's Reluctance

Chandrasekaran’s second five-year term as chairman of Tata Sons is due to end in February 2027. However, deliberations on a possible third term were put on hold after Noel Tata raised concerns about the performance of some of the group’s newer businesses. He also sought greater clarity on their strategy and future capital requirements. Another added layer of concern was the demand for an assurance that Tata Sons would not be listed on the stock market, a requirement as part of RBI's Upper Layer NBFC list.

Under Chandrasekaran, the Tata Group has committed significant capital to aviation, digital businesses, electronics, semiconductors and batteries as it looks to create new growth engines beyond established businesses such as TCS, Tata Motors and Tata Steel.

Many of these newer ventures, however, remain capital-intensive and have yet to generate meaningful profits.

Air India and Air India Express together reported a loss of ₹22,238 crore in FY26, more than twice the ₹10,859 crore loss recorded a year earlier. Tata Digital reported a loss of ₹4,974 crore during the same year.

In May, the Tata Sons board reviewed turnaround and transformation plans for Air India, Tata Digital and Tata Electronics as concerns grew over the financial demands of some of these businesses. Air India and Tata Digital were expected to remain loss-making for at least the next three years.

Air India, in particular, remains a long-term turnaround exercise. In the Tata Sons' 2026 Annual Report, Chandrasekaran told shareholders that rebuilding the airline should be viewed as a five-to-10-year journey.

The losses, however, do not indicate financial stress at Tata Sons. The holding company reported a 21.8% rise in profit after tax to ₹31,961 crore in FY26.

Instead, they have intensified a more fundamental debate over capital allocation: how much Tata Sons should continue investing in businesses that may take years to generate returns, and how those investments should be financed.

The issue is particularly important because Tata Sons depends heavily on dividends from its operating companies for income, with TCS remaining by far its largest contributor.

Running alongside the capital-allocation debate was another key question: will Tata Sons eventually have to list?

The RBI had classified Tata Sons as an Upper Layer NBFC, which ordinarily carries a listing requirement. Tata Sons has sought to surrender its NBFC registration to retain its unlisted status.

The issue matters to Tata Trusts, which wants to preserve control over Tata Sons, and to the Shapoorji Pallonji Group, which owns an 18.37% stake and has been seeking ways to unlock value from its holding.

Chandrasekaran’s resistance to giving an unconditional assurance that Tata Sons would never list became another point of friction with Noel Tata.

At the heart of the dispute was Tata’s unusual governance structure, which places a professionally managed holding company alongside charitable trusts that are its largest shareholders. The question was therefore not simply about who should lead Tata Sons, but how much say the trusts should have over the group's strategic direction. The balance had been up for debate since the passing of Ratan Tata on October 9, 2024. He was the last man to hold the chairmanship of both Tata Sons and Tata Trusts.

Two years before that, at Tata Sons’ Annual General Meeting on August 30, 2022, shareholders approved an amendment to the company’s Articles of Association that formally separated the chairmanships of Tata Sons and the two principal Tata Trusts. The amended Article 118 barred a person serving as chairman of either the Sir Dorabji Tata Trust or the Sir Ratan Tata Trust from simultaneously serving as chairman of the Tata Sons board.

When Noel Tata was appointed Chairman of Tata Trusts in 2024, questions were raised if his influence on Tata Sons would be similar to that wielded by his half-brother.

Tata Trusts' Infighting

After Ratan Tata’s death in October 2024 and Noel Tata’s elevation as chairman of the Trusts, disagreements emerged among trustees over appointments, tenure, representation on the Tata Sons board and governance. The differences eventually spilled into proceedings involving the Sir Ratan Tata Trust (SRTT), one of the two principal Tata Trusts.

The dispute has involved questions over the composition and tenure of trustees, including issues raised by advocate Katyayani Agrawal and trustee Venu Srinivasan. It has also affected SRTT’s ability to convene meetings and take decisions. Vijay Singh, vice-chairman of Tata Trusts, has meanwhile decided not to seek another term as an SRTT trustee when his tenure ends on August 14.

The fallout has extended to Tata Sons because the two principal Trusts—SRTT and Sir Dorabji Tata Trust (SDTT)—together own about 66% of the holding company. Tata Sons’ Articles of Association require a board meeting to have at least five members present, including a representative jointly nominated by SRTT and SDTT, as long as the two trusts together hold at least 40% of Tata Sons.

The requirement has become difficult to meet after the Maharashtra Charity Commissioner barred SRTT from holding board meetings over alleged violations of public trust laws. Without an SRTT meeting, the Trust cannot jointly nominate a representative with SDTT, potentially creating a roadblock to Tata Sons’ board functioning.

The issue became particularly significant because Chandrasekaran’s reappointment as a director was due to come before the AGM. His position as Tata Sons chairman depends on his directorship.

Tata Sons' Articles of Association allow a meeting to be adjourned if quorum is not met, but the rules remain unclear if the Trusts’ representative is still unavailable at the adjourned meeting. Tata Sons could seek an extension from the Registrar of Companies, while the Trusts could seek a relaxation from the Charity Commissioner.

All Eyes on August 18

These fault lines were set to come together at Tata Sons’ August 18 AGM, where N Chandrasekaran is due to retire by rotation as a director and seek reappointment. His decision to step down as chairman does not, by itself, settle whether he will continue on the Tata Sons board.

The distinction between his two positions is important. His current term as chairman runs until February 2027, but his position as a director is subject to the retirement-by-rotation process at the AGM.

Further, his succession process itself is not entirely in the hands of the Tata Sons board. As long as Tata Trusts collectively hold at least 40% of Tata Sons’ ordinary share capital, Article 118 of the company’s Articles of Association provides for a five-member selection committee, according to a MoneyControl report. Three members are jointly nominated by Sir Dorabji Tata Trust and Sir Ratan Tata Trust, one comes from the Tata Sons board and one is an independent outside member chosen by the board.

The committee recommends a candidate, after which the Tata Sons board can appoint the chairman in accordance with the Articles. The same mechanism applies when a chairman is removed.

This was the process used after Cyrus Mistry’s removal and eventually led to Chandrasekaran’s appointment in 2017. It now assumes renewed importance. But the challenge this time is different: the two Trusts that must jointly nominate three members of the succession committee are themselves dealing with internal disagreements and proceedings involving SRTT.

For Tata Sons, therefore, finding Chandrasekaran’s successor may depend not only on identifying the right candidate, but also on whether the Trusts can first find common ground.