A significant 2025 legal opinion by former Supreme Court Justice RF Nariman has gained renewed relevance amid an ongoing governance dispute between Tata Sons and its principal shareholders, Tata Trusts. The opinion, dated April 13, 2025, addresses a critical question: whether directors nominated by Tata Trusts on the Tata Sons board are legally bound to follow the Trusts' specific directions when voting on company resolutions.
The Protocol and Justice Nariman's Stance
Justice Nariman's opinion was sought to examine a proposed protocol for directors nominated by the Sir Dorabji Tata Trust and Sir Ratan Tata Trust. This protocol suggested that nominee directors would consult with the Trustees on certain Tata Sons board resolutions and then vote or abstain in line with the guidance received. Crucially, it also implied that a nominee director's position could be reviewed and potentially withdrawn if they failed to act according to the Trustees' guidance.
However, Justice Nariman concluded that such an arrangement would conflict with the statutory duties of company directors under the Companies Act, 2013. He emphasized that nominee directors must exercise their own independent judgment while discharging their duties, acting in good faith in the interests of the company and its stakeholders, and with due care, skill, and diligence.
Legal Basis for Independent Judgment
The opinion heavily relied on Section 166 of the Companies Act, 2013, which outlines the fiduciary duties of directors. These duties include acting independently and in the best interest of the company itself, rather than solely as representatives of their nominating entity.
Justice Nariman also referenced the Supreme Court's March 26, 2021, judgment in TCS Limited v. Cyrus Investments Pvt. Ltd. and Others. This landmark judgment had previously considered the position and duties of directors nominated by charitable trusts, reinforcing the principle of independent judgment for all directors.
“An idea about the stand to be taken by the nominee directors cannot be stretched to mean that the nominee director is only allowed to voice the stand of the Trustees of the Trust and cannot exercise any independent judgment,” Justice Nariman was quoted as saying.
He further clarified that while a nominee director could consider the Trustees' views, they must ultimately apply their own judgment, aligning it with their fiduciary obligations to the company.
Relevance to Current Tata Sons Dispute
Although predating the latest dispute, Justice Nariman's opinion is highly pertinent. The current contention centers on decisions made at a September 17, 2026, Tata Sons board meeting, including the reappointment of N Chandrasekaran as chairman. Noel Tata, chairman of Tata Trusts and one of two Trust nominee directors, opposed these decisions, while the other nominee, Venu Srinivasan, supported them.
Tata Trusts, which holds approximately 66% of Tata Sons, subsequently challenged Chandrasekaran's reappointment, arguing that Tata Sons' Articles of Association (AoA) require the affirmative support of a majority of the Trust-nominated directors. Given there are only two such nominees, the Trusts contend both must vote in favor. Justice Nariman's opinion does not directly resolve this AoA interpretation but underscores the broader legal principle of director independence, which remains a central theme in such corporate governance debates.