'If this goes into a dirty battle ...': Harish Salve weighs in on Tata Sons-Trusts dispute

Xtreme News India   21-09-2026 19:35:55   465218707

'If this goes into a dirty battle ...': Harish Salve weighs in on Tata Sons-Trusts dispute

New Delhi (Special correspondent) - Amid the intensifying boardroom battle at Tata Sons, leading lawyer Harish Salve weighs in on the key legal questions surrounding N Chandrasekaran's reappointment, the Tata Trusts' rights, and the Reserve Bank of India's listing directive for the conglomerate. In an exclusive interview to CNN-News18's Rahul Shivshankar, Salve—who has been advising Tata Sons on the issue—also explains why he believes the Trusts' nominee directors have a fiduciary duty to Tata Sons and why the dispute could ultimately end up in court.

Here's the full transcript of the interview broadcast by Moneycontrol.com for our viewers.

Rahul S. : Mr Salve, I want you to first sort of cast a glance over this entire issue. Tatas are much, much bigger than just being a business.

You know this, Tatas are much bigger than one individual. You know, family businesses are meant to squabble over succession, but not professionally run companies such as the Tatas that have set a benchmark for what really others aspire to in this country. So, firstly, your views, largely on this boardroom tussle that has been dominating the headlines.

Mr. Salve : et an almost unsurpassable benchmark of corporate governance in India, where a homegrown intern who joined as a youngster became the chairman of the lead of Tata Sons, the company at the top.

These are not privately owned shares, these are shares held by trusts, by definition. It is held in trust for public charity. There is an oversight which the trust directors must make sure that the companies are governed well.

The Reserve Bank of India, and I wanted to add a caveat, I have been consulted by Tatas. I have been advising. The Reserve Bank of India has framed a set of rules for quite some time.

They are called CIC rules because a company which doesn't do any activity by itself, but only holds the assets, becomes a non-banking financial company. Tata Sons is a financial company, that's not in doubt. There are different layers in which it is to be classified and of the latest tier prescribed by the Reserve Bank is that if your assets under management are over one lakh crore, Tatas are about two lakh crores, then you become an Layer 1 company and a compulsory edict of that is that you have to be listed.

So, why is trust registry being listed? Because the trust control will get diluted over the company. Now, in today's day and age for a company with this two lakh crore, two lakh crore ballpark figure, a 200 billion dollar conglomerate, you cannot, if listing gets you more transparency, if listing gets you more institutionalized governance, it should be welcomed rather than eschewed.

And it is obvious that there are some private ambitions at play. At the end of the day, Chandra is a professional. Whether in 2026 or whether in 2031, he is always going to be a hired chairman in one sense.

And it's good after him, after five years, after ten years, whenever his tenure ends, there will be another institutionalized appointment. Because when you have become the face of India, Tatas are an institution of which each one of us as an Indian is proud. It's no longer a company held and owned by Parsis.

You know, we have to get past this, since I control the trust, I control this group mindset.

Rahul S: So, let me ask you, let's get into some of the issues. First of all, is yesterday's resolution reappointing N. Chandrasekaran even valid? Because the Tata Trust says the article requires the affirmative vote of a majority of trust-nominated directors and Noel Tata voted against it. Now, we also have former, and it's come out in the press, former CJI, D.Y. Chandrachud says the reappointment is invalid. And Tata Sons, however, appears to rely on Harsh Manwani, an independent director of Tata Sons, who chaired the meeting. So, can a casting vote override a specific requirement in the articles relating to trust-nominated directors?

Harish Salve: Why not? If you say majority of the, they must have a support of the majority. And one director votes for, one director votes against. What do you do, paralyze the company? This is the danger why Reserve Bank says you have to get listed.

You cannot be a hostage to fortune then. Yes, Mr. Justice Chandrachud may have his own private views. If this gets into litigation, he won't be there, we will be there and we will deal with it.

But, I am very clear that where it says it must have a majority of the trust votes, it also has a casting vote. No company can have a deadlock. Can you imagine what we are asking people to accept?

That a 2 lakh crore company get into a deadlock situation. Because if the two nominee directors are not able to agree, no resolution will be passed. What happens?

Paralysis. Somebody who says this has to have some modicum of sense.

Rahul S: Let's go into the opinion and I quote the affirmative.

Harish Salve: I don't want to discuss Chandrachud's opinions here. Because I am legally consulted by Tata, I don't want to have a battle of TV channel about whether he is right or wrong. He is entitled to his view. Let's see what is upheld in a court.

Rahul S: Okay, so even if the articles seem to suggest what Noel Tata seems to be putting out there, even then you think that this particular issue…

Harish Salve: It's very simple, Rahul. There were two Tata Sons directors. One voted for it, one voted against it. The chairman had to vote otherwise you have a stalemate.

Till Mr. Venu Srinivasan continues, I believe there was some suggestion that Mr. Venu Srinivasan must vote in accordance with the directions of the Tata Trust. Anybody who says that doesn't understand elements of Indian company law. It is well settled that even if you are… take a holding-subsidiary relationship.

The directors of a subsidiary are directly nominated by the holding company. But the Supreme Court has held they owe fiduciary duty to the subsidiary to which they are appointed. They are not puppets.

So, if it is a direction of the Reserve Bank that you will list and the Tata Trust says you will not list and if you are in breach of the Reserve Bank circular, you are committing a violation of the law. The director of the Tata Trust says, sorry, I will go along with what my Reserve Bank says. That's his first duty, his fiduciary duty and he has done that.

It is the other director who is in breach of fiduciary duty who is putting his own personal interest in Tata's interest, so-called interest of Tata Trust above the interest of Tata Sons. In a situation like this, the chairman has voted. That's the end of the matter.

If he wants to challenge it in court, let him challenge. I don't know why Chandrachud is giving opinion which has to be cited in a public debate.

Rahul S: So, what is the basis for the RBI interpretation here? Is it sound legal basis derived from?

Harish Salve: It's very simple. Under the NBFC regulations, if you have direct or indirect access to public funds, you have to follow a particular route. What Tata Sons did is, it returned all the loans Tata Sons had. But the loans were taken in the downstream Tata company.

Reserve Bank clarified, added an explanation to the rule saying, even if you have indirect access to public funds. Now, Tata Sons may not take a loan. But if all the Tata companies whose shares are held by Tata Sons take loan, the idea is financial control.

The simple point, Rahul, is this. Today, can you imagine, perish the thought, if Tata Sons crashes, can you imagine the impact on the economy?

Rahul S: Of course.

Harish Salve: Can you say Reserve Bank has no right to control Tata Sons just because it doesn't directly take loans, but all companies under it take loans, make profits and all those profits are given. Instead of being kept within those companies, those profits are given as dividend. Those companies take loans, generate profits and pay dividends.

Otherwise, the money paid as dividend can be used instead of the debt. You do have indirect access to public funds. And if there is a doubt, who is the last person to decide this?

The regulator, right? The regulator has said, they applied, the regulator took their time, they added a clarification, the regulator issued a direction. You are not taking on the Reserve Bank of India, you are taking on the government of India. Why? Because somebody says that Tata must be a chairman of Tatas.

Rahul S: One of the things that is being said is that the RBI has cleared the way, therefore, down the line for even a shareholding reconfiguration in one sense.

Harish Salve: RBI has said you list yourself. How you list yourself is entirely your discretion. You can have so many different structures, you list yourself. I was reading somewhere, even the minority shareholder who normally is not on the same page on this, they are on the same page. Even the Pallonji said that we have 18% share, my money is stuck, we would like to monetize our shares. What's wrong with listing Tata Sons? It's only somebody who says I want opacity in governance and I want disproportionate powers, who will oppose listing?

Rahul S: Mr. Chandrasekaran himself had formally communicated last month that he would not seek another term. The trust says this decision was voluntary, publicly communicated and accepted.

Once a chairman is formally declined another term, can the board simply ask him to reconsider and then validly reappoint him or does his earlier decision have any legal finality, sir?

Harish Salve: Where is the legal finality? He said I will not contest the next. My hat won't be in the ring for the next term. He said that because all this unpleasantness was going on within the board. People persuaded him that for India's sake, for Tata's sake, please continue.

There is so much work in progress, so much work in progress in Tata's hydrogen projects, Air India, defence projects. He is being there for five years. He is in the best interest of India, he is in the best interest of Tatas.

So, if he is persuaded to change his mind, what's wrong? Doesn't it happen every day in companies? Somebody says look it's time for me to leave.

There are two companies in which I have been telling them please for God's sake now on my next term please don't reappoint me. One month before that they come and say sir, one more term please. Okay, not next term please. Okay, doesn't this happen to all of us? Every now and then.

Rahul S: So, what exactly is the legal status of Tata Trust nominee directors? Are Noel Tata and other Trust nominee simply directors with the same fiduciary duties as everyone else or do the articles give them a…

Harish Salve: The articles cannot detract from company law and it's a fundamental principle of company jurisprudence. He borrowed this jurisprudence from the old English company.

Even the American law is on the same page. A director has fiduciary duties towards the company. The interest of the company must always, always come first.

As long as the interest of the company is not in question, the director must act in accordance with the instructions issued by his nominator, where you are a nominated director. If the Reserve Bank of India has said list, Tata Trust cannot say don't list.

Rahul S: So, here you have a situation. The two Trust nominees themselves disagree. Noel Tata and Venu Srinivasan have differences here. They voted differently. Whose position prevails? I mean, you are talking about an entity that has the controlling stake in Tata Sons?

Harish Salve: So, but the controlling stake again in the articles, while it calls for an affirmative vote, they don't have the majority on the board. The articles give them a limited, in one sense, priority. The limited priority is a resolution must have a vote of the Tata, affirmative vote of the majority. Now, where the majority breaks, the chairman is entitled to give a casting vote. Otherwise, you have a paralysis.

Rahul S: So, can the Trust, despite holding 66% of Tata Sons, actually prevent or delay a listing if the RBI requires Tata Sons to comply with?

Harish Salve: It has to be passed by the board of Tatas. If the Trust doesn't have a majority on the board, they have to pack, they have to have all fresh board, etc. If they do that, and if in a company of, as public starter, this is not some small private company set up by two friends which is running grocery stores. This is an institution. You can't go sacking directors and renominating your board just because somebody says my nominee must be the next chairman.

Rahul S: But I am asking you pointedly, could the listing itself become the next major legal battle here?

Harish Salve: It will be. It will be.

Rahul S: And it can drag on fundamentally for years because our legal system, as you know.

Harish Salve: I don't know. I don't know whether Tata Sons is going to challenge it. I hope not. In my opinion, if any challenge brought would be misconceived. If the Tata Trusts want to challenge that direction, saying that it is affecting, they may have locus to challenge it. The Reserve Bank and the government, I am sure, will have a robust defence.

Rahul S: You know, we began by saying that the Tatas are much more than a business. Indian business as a whole sets its store by how the Tatas govern corporately. So, I have to ask you this because it comes down to a certain moral framework in which the Tatas act. And Noel Tata and the Trusts have expressed concerns that once Tata Sons is listed, public investors will inevitably place, you know, a greater emphasis on profits and returns, potentially weakening the Tata Trusts' ability to pursue its broader philanthropic objectives. So, they've said that there is a moral problem here.

Harish Salve: Let's just see the fallacy in that. The charity is pursued by the Trusts. Tata Sons and Tata and all the Tata companies work on the principle of maximum returns for shareholders. At every Tata, most of the Tata Sons significant companies are listed companies. Tata Motors, Tata Steel, everything is a listed company.

So, listed companies by definition have to work in the best interest of their shareholders. Each Tata Sons and other public shareholders and institutions. So, as far as Tata Sons is concerned, Tata Sons objective has to be to grow wealth, albeit consistent with principles of ethics and corporate governance. Tata Sons grows wealth. Tata Sons pays out large dividends every year to the Tata Trusts. That's where profit ends, that's where charity begins.

Rahul S: So, you're saying that you could effectively create some sort of an iron curtain between the two. That, okay, we pursue profits, get the money on the table and you do what you want to do with it.

Harish Salve: Tata Sons is not a charitable organization.

Rahul S: Right.

Harish Salve: Tata Sons is a holding company which controls a slew of listed and a few unlisted companies. Each of those companies work for profit. And I don't mean profit in the derisive sense. I mean, they do not work for charity. They are in industrial and commerce. TCS, one of the biggest companies held by Tata Sons. Tata Communications Service, one of the global…

Rahul S: Giants.

Harish Salve: … leaders. Tata Motors makes the most valuable car, one of the most valuable retail cars, the Range Rover. So, all these companies, they don't work for charity. They make money. All the money they make goes filtered up to the top of the pyramid, Tata Sons. Tata Sons writes a cheque to Tata Trust.

That's where the profit ends, charity begins.

Rahul S: But in a reconstituted, I'm just saying, shareholding pattern, you might have people who are not philanthropically inclined.

Harish Salve: You don't need philanthropy in Tata Sons. Tata Sons will distribute dividends which go with ownership of shares.

Rahul S: Okay. So, that's an automatic process and Tata Trust gets its due, so to speak.

Harish Salve: If it is listed, Tata Sons will have to distribute all its profits as dividend. Because that's how it will add value to the share. And 65% shares will continue to be held by the Trust. Mind you, this is the other big fallacy is, if Tata Sons expands its capital base, you get, say, 10,000 rupees per share dividend. Correct? And you own 1 crore shares. Correct? You get 10,000 into 1 crore. So, you get 10,000 crores dividend. If the share capital becomes very large, you will still have your 1 crore shares. Correct?

Rahul S: Yes.

Harish Salve: And you will still get that 10,000 rupee dividend. Your size remains the same. Because if Tata Sons invests more capital, the more capital will increase the profit. Nobody expands capital to reduce the per capita profit. Now, you may get diluted to 25%, but your wealth doesn't get diluted.

Rahul S: So, final few questions, sir. Does RBI's caveat before the Bombay High Court materially change the legal landscape?

Harish Salve: I'm happy RBI has filed a caveat. Because RBI's caveat shows that we are ready to deal with any challenge which may be brought.

Rahul S: What role can the Maharashtra Charity Commissioner play? If the Tata Trusts are charitable entities and the Charity Commissioner has jurisdiction over their governance and use of charitable assets, can an order of the Charity Commissioner affect the Trust's ability to exercise their shareholder rights in Tata Sons? Including voting on the Chairman's appointment or decisions concerning a listing. I'm seeing some newspaper articles that have brought this in.

Harish Salve: Yes, there are - see, now, again, that's a completely different jurisprudence. It is shown that the trustees of the Trust are acting in personal interest and not in the interest of the Trust. Charity Commissioner can certainly step in. If a complaint is made that Mr. Y, who is a trustee, is doing this to promote his own people and that's not in the interest of Tata Trust, well, the Charity Commissioner can take a call on it.

Rahul S: So, are we heading towards another Cyrus Mistry-Ratan Tata style legal battle, sir, which could further erode the image of Tatas? Is that where we are headed?

Harish Salve: I hope not.

Rahul S: Because that dispute went to the Supreme Court, if you remember, and raised fundamental questions about the articles, the rights of Tata Trusts and the powers of the Tata Sons board.

Harish Salve: I know I appeared in the company board. I also appeared in the Supreme Court. I know the whole trajectory of that battle. It didn't end well for anybody's reputation. But Mr. Ratan Tata at least proved one thing. Everybody said, Mr. Ratan Tata can't bear the idea of not giving an office. He said, I am here in transition. And what a transition! What a transition! So, it ended on a high point, a very strong judgment by the Supreme Court. And I hope this doesn't, I hope better sense prevails. They can all sit and talk together. The trouble is ego shouldn't come in. People should sit and talk and find common ground and resolve things.

Rahul S: Yes, because I think the last thing anyone wants is the courts to finally define the limits of the Trust, special rights and so and so forth?

Harish Salve: Any, as Justice Kirpal used to have a very nice expression, in situations like that, the worst settlement will be better than the best victory. Sit, talk, find a solution and move ahead.

And in that solution, your end, if bona fide in your heart, what you have is the interest of the country in focus, you will come to the right conclusion. Not the interest of the Trust, not even the interest of Tata Sons, to say. Interest of India, today Tata, believe me, I live in London, I am telling you, I meet the global community. Tatas are the face of India, corporate India. If today the government is so supportive of the Tatas, it's because Tatas have done us proud. I am sure they will be able to sit together. This will be a bubble which will burst.

Rahul S: Well, since you invoked the government, there are many people who are talking in terms of conspiracy theories. The government is sort of using levers, using another authority.

Harish Salve: Do they feel Prime Minister Modi now aspires to be Chairman Tatas or…

Rahul S: You know, I am just addressing that quarter.

Harish Salve: That's why I am saying, the government has one interest in this.

Rahul S: Yes.

Harish Salve: Government has only one interest in this. Government can have only one interest in this. I know how highly the government respects the Tata group. The way Air India was sold to the Tata group, people say, why did Tatas buy it? Tatas have helped India in taking an  taking an airline, which was in a terrible state. If they are losing money, I say God bless them, they are saving the taxpayer from writing incessant cheques airline, which was in a terrible state. If they are losing money, I say God bless them, they are saving the taxpayer from writing incessant cheques which were just going down the drain. It will take time. It might take two years, three years, five years. And you have seen the global headwinds, the whole industry has had.

Who else could have done this? If it had been sold on those terms to anybody else, believe me, there have been rampant allegations of corruption. Tatas are given a defence deal, Tatas are given a hydrogen deal, nobody alleges corruption. That's what is in the government's mind. The government wants this to continue. Are they doing anything wrong? This is what the government has in mind and if the government doesn't want instability in India's largest corporate group, at a time like today where we are in such tumultuous times, what's wrong?

Rahul S: Okay, what's your gut at the end of the day? Are we headed towards negotiations or are we headed towards a legal.