Justice Nariman mentioned nominee administrators should train their very own impartial judgment whereas discharging their duties as firm administrators, in line with a report by information company ANI.
The opinion, dated April 13, 2025, got here whereas Justice Nariman was analyzing a proposed protocol for administrators nominated by Sir Dorabji Tata Belief and Sir Ratan Tata Belief.
The protocol proposed that the nominee administrators seek the advice of the Trustees on sure Tata Sons board resolutions after which vote or abstain consistent with the steerage they obtained.
Justice Nariman discovered that such an association would battle with the administrators’ statutory duties below the Corporations Act, 2013.
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What was the protocol?
The protocol adopted a decision handed by the 2 Trusts on October 17, 2024.
Underneath it, nominee administrators coping with resolutions regarding specified provisions of Tata Sons’ Articles of Affiliation would seek the advice of the Trustees earlier than voting. They may be requested to lift resolutions earlier than the Tata Sons board.
The protocol mentioned the Trustees might instantly evaluate whether or not a nominee director’s nomination must be withdrawn if the director didn’t vote, abstain or in any other case act in accordance with the Trustees’ steerage or request.
Justice Nariman examined the association below Part 166 of the Corporations Act, which units out administrators’ fiduciary duties.
These embody appearing in good religion within the pursuits of the corporate and its stakeholders and exercising due and cheap care, talent, diligence and impartial judgment.
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What justice Nariman mentioned
Justice Nariman additionally relied on the SC’s March 26, 2021 judgment in TCS Restricted v. Cyrus Investments Pvt. Ltd. and Others. The judgment had thought of, amongst different points, the place and duties of administrators nominated by charitable trusts.
Justice Nariman mentioned an institutional shareholder having a view on how its nominee administrators ought to vote couldn’t imply that the administrators have been stripped of their impartial judgment.
“An thought concerning the stand to be taken by the nominee administrators can’t be stretched to imply that the nominee director is simply allowed to voice the stand of the Trustees of the Belief and can’t train any impartial judgment,” he was quoted as saying by the information company.
He added {that a} nominee director might think about the Trustees’ views whereas additionally making use of his personal judgment.
“He can voice the opinion of the trustees along with making use of his thoughts to different related issues, together with his fiduciary obligations to the corporate of which he’s a director,” Justice Nariman mentioned.
The justice concluded that requiring a nominee director to strictly comply with the Trustees’ steerage, with the opportunity of elimination for failing to take action, can be opposite to the statutory requirement of impartial judgment.
“It’s my opinion subsequently that this Protocol can be opposite to the legislation, i.e. the Corporations Act 2013 and the aforesaid Supreme Courtroom Judgment dated 26 March 2021,” Justice Nariman mentioned.
Why it issues within the present row
The opinion predates the present dispute between Tata Sons and Tata Trusts, however it addresses a associated query: the distinction between the Trusts’ rights as shareholders and the duties of administrators nominated by them as soon as they be part of the Tata Sons board.
The most recent dispute centres on selections taken at Tata Sons’ September 17, 2026 board assembly.
The board authorised N Chandrasekaran’s reappointment as chairman for an additional 5 years and moved in the direction of a inventory market itemizing.
Noel Tata, chairman of Tata Trusts and one of many Trusts’ two nominee administrators on the Tata Sons board, opposed the choices. The opposite nominee director, Venu Srinivasan, supported them.
Tata Trusts later challenged the validity of Chandrasekaran’s reappointment. It argued that Tata Sons’ Articles of Affiliation require the affirmative assist of a majority of the Belief-nominated administrators.
With solely two Belief nominees on the board, the Trusts contend that each should vote in favour for the requirement to be met.
Tata Trusts, which holds about 66% of Tata Sons, has subsequently mentioned the September 17 decision had no authorized impact.
Justice Nariman’s opinion doesn’t immediately settle that challenge. It handled whether or not Tata Trusts might require its nominee administrators to vote consistent with directions from the Trustees.
