'Listing leads to greater transparency and shareholder oversight.'
On July 29, top executives of Tata companies, along with Tata Sons Chairman N Chandrasekaran, gathered at the National Centre for the Performing Arts in Mumbai to honour the legacy of JRD Tata on his 122nd birth anniversary.
Tata Trusts Chairman Noel Tata and other trustees were also seated in the front rows of the auditorium.
It seemed like a cordial evening -- and nobody could tell what was to come just a fortnight later, according to an executive who attended the event.
He was, of course, talking about Chandrasekaran (or Chandra as he's often called) announcing on August 12 that he will not seek a third term when his tenure as chairman ends on February 20, 2027.
'It has been six months since that board meeting (of February 24, 2026), and no resolution has been reached till date,' he wrote to the Tata Sons board members.
While the immediate reasons for Chandra's decision have been a point of intense discussion, the root cause of it all may be linked to the past -- dating back to a century or so.
"The central issue is that of shareholder power conferred not by hard earned or hard won shares but by two wills of 100 years ago empowering trustees (of Tata Trusts) whose appointment is opaque in the absence of guidelines," a source said.
The trustees were not subjected to any regulatory scrutiny till recently, the person said in a reference to a recent move by Maharashtra charity commissioner, which was a first.
The charity commissioner froze one of the core shareholding trusts -- Sir Ratan Tata Trust (SRTT) -- earlier this year over alleged violation of governance norms relating to lifetime trustees.
The Maharashtra Trust Act had been amended in September 2025, limiting the number of perpetual trustees to a fourth of the total.
To comply, two of the three perpetual trustees (Ratan Tata's brother Jimmy Tata, Noel Tata and Jehangir HC Jehangir) will need to step down at SRTT and seek renomination with a tenure.
SRTT is a public charitable trust established on September 10, 1919, under the will of Sir Ratan Tata, the youngest son of Tata Group founder Jamsetji Tata.
Registered with the office of the charity commissioner, Mumbai, on September 5, 1958, 'the trust derives its governing framework from the will of Sir Ratan Tata along with a codicil,' according to a lawyer familiar with the matter.
The other major trust under Tata Trusts -- Sir Dorabji Tata Trust -- was set up in 1932 through the testamentary provisions of Sir Dorabji Tata's estate. Dorabji Tata was the eldest son of Jamsetji Tata.
"The circle needs to be closed through the listing of Tata Sons," another source in the Tata Group argued while talking about the "flawed" governance structure vis-a-vis Tata Sons and Tata Trusts, which the source said exercises excessive control over the holding firm of the group.
To explain the importance of Tata Sons listing -- an issue that rested with the Reserve Bank of India for long -- industry observers and analysts look back at the several amendments of the Articles of Association (AoA) of Tata Sons, the holding company of the salt-to-software conglomerate.
For instance, in 2000, when Ratan Tata was the chairman of both Tata Sons and Tata Trusts, the veto rights for Tata Trusts (the principal shareholder of Tata Sons with a 66 per cent stake) were introduced into the AoA of Tata Sons through Article 121.
The clause granted Tata Trusts nominee directors on the board of Tata Sons affirmative voting rights on key board decisions. There were amendments subsequently to tweak the clauses.
However, it was in April 2014, that the AoA went through a major amendment at an extraordinary general meeting of Tata Sons, according to an official. Article 121A came into play now.
With this, nominee directors became even more powerful as their affirmative vote was required on almost every matter that came to the Tata Sons board, especially on appointments and dismissals of top executives, as well as investment decisions.
That was the time when Cyrus Mistry had been appointed Tata Sons chairman after Ratan Tata had retired in December 2012.
It was the first time that the post of Tata Sons chairman and Tata Trusts chairman were held by two different people.
Later in 2022, the AoA was amended, specifying that no single person could hold the posts of Tata Sons and Tata Trusts chairman, thereby casting it in stone.
As for the introduction of 121A in 2014, Cyrus Mistry, a scion of the Shapoorji Pallonji Group with 18 per cent stake in Tata Sons, felt it came in the way of the autonomy of the Tata Sons board, according to people in the know.
He's learnt to have written to Ratan Tata, who died in 2024, expressing his displeasure.
Ratan Tata, who brought in 121A to strengthen the control and authority of trusts, stressed that the veto power would never be used by the nominee directors, likening it to a nuclear deterrent, a source pointed out.
Although the veto power was not used, Cyrus Mistry was removed as Tata Sons chairman in October 2016 by the board, triggering a prolonged court battle.
Now, 10 years on, another chairman of Tata Sons is exiting, although under very different circumstances. Chandra, having started out as an intern at Tata Consultancy Services, is the first non-Parsi and professional executive to lead the group as chairman.
Chandra wrote in his letter to the Tata Sons board directors on August 12 that one board member did not support his third term as chairman even after Tata Trusts passed a resolution granting him another five years.
The letter did not name Noel Tata, half-brother of Ratan Tata, who became Tata Trusts chairman in October 2024 and then a nominee director on Tata Sons board.
But, in a February 2026 Tata Sons board meeting, Noel Tata had raised concerns over the financial performance of some of the Tata companies such as Air India and Tata Digital, making Chandra's third term conditional.
Besides being told to show profitability and turnarounds, Chandra was asked to ensure that Tata Sons remained private.
From February 2026, when Chandra's term renewal was put on hold, to now, there has been no movement on the matter.
Those are the 'six months' of leadership uncertainty that Chandra has written about in his exit letter.
Connecting the dots, one of the sources quoted above said: "The imminent veto power of the nominee directors has resulted in the present situation."
Even after Chandra leaves, the veto power of nominee directors will be a constant threat over Tata Sons and would affect decision-making, he said, adding that listing of Tata Sons would remove these special powers.
"There's no doubt that listing leads to greater transparency and shareholder oversight," K M Chandrasekhar, a former Cabinet secretary, told Business Standard recently.
Former finance secretary Ashok Chawla also stressed in a recent conversation that listing "is the imperative of governance and transparency in respect of an entity which controls a number of important and large operating entities."
Feature Presentation: Aslam Hunani/Rediff