Tata Group’s biggest meeting obstructed, the company will go to the tribunal to find a way!

Main cause of delay in AGM

Tata Sons was scheduled to hold its annual general meeting on August 18, but had to postpone it due to lack of quorum. After this, the company has also received a three-month extension from the Registrar of Companies (ROC). People connected to the matter say that the Maharashtra Charity Commissioner has banned Sir Ratan Tata Trust (SRTT) from taking any decisions or meetings. According to the Tata Sons Rules (Clause 86 of the Articles of Association), a quorum of any general meeting shall not be considered complete unless at least five members are present in person. In this, it is mandatory to have at least one representative jointly nominated by Sir Dorabji Tata Trust (SDTT) and SRTT. This rule will be applicable as long as both the trusts hold at least 40 per cent stake in Tata Sons.

Talking about the figures, SDTT holds 27.98 per cent stake in Tata Sons and SRTT holds 23.56 per cent stake. Together, it comes to 51.54 per cent, while other philanthropic Tata Trusts are included, bringing the total stake to around 66 per cent. Due to the ban on SRTT, both the trusts cannot elect their representatives together, thereby not meeting the quorum of the meeting.

Noel Tata Vs Other Directors

This important meeting will have a direct impact on the appointment of N Chandrasekaran as director. In the Tata Sons board meeting held last Thursday, there was a conflict on two main issues. The first issue was to reinstate N Chandrasekaran as chairman, while the second issue was related to the listing of the company. Tata Trusts Chairman Noel Tata strongly opposed both these proposals, while the rest of the board directors fully supported them. Experts say Chandrasekaran will continue as a director until a valid AGM is held.

Tata Sons Expectations from NCLT

If the quorum issue is not resolved due to ban on SRTT, Tata Sons will take legal route and approach NCLT. Under Section 97(1) of the Companies Act 2013, the NCLT has the power to direct a company to convene an AGM. The tribunal can also bypass the normal rules of quorum if it so wishes. According to Shafaq Uraji Sapre, managing partner of law firm Chandok & Mahajan, the NCLT can also order that only one member present at a meeting be considered as a quorum. This would give Tata Sons a legal avenue to hold meetings even without a joint SRTT-SDTT representative. A company official also clarified that since Tata Sons has to act quickly on many issues, it is very important to hold the AGM as soon as possible within legal limits.

A decision mired in legal dispute

However, getting relief from NCLT does not seem so easy. According to legal experts, the NCLT’s order can only regulate the conduct of AGMs under the Companies Act. It cannot set aside the order of the Charity Commissioner, which is applicable to the SRTT. Vimal Tapadia, partner, Morphis Management Services, says that even if the NCLT permits the meeting, the original dispute will not end completely. An affected shareholder may challenge the validity of this meeting or the resolutions passed in the future, which may lead to fresh legal battles.

Shreni Shetty, head of dispute resolution at law firm ANB Legal, said that under the order of the Charity Commissioner, the SRTT had to suspend its meeting pending the inquiry report. In such a situation, it is not possible to nominate a representative for SRTT. He believes that the tribunal has wide powers to convene the meeting, but it will be very difficult for the NCLT to ignore the rights of shareholders which are already clearly laid down in the company’s rules. All eyes are now on how Tata Sons gets out of this legal tangle to take forward its stalled business plans.