Mumbai: Tata Trusts wants Tata Sons to explore all options, including asking the Reserve Bank of India to reconsider and clarify its decision directing it to go public, before going to court, two group executives said. he said he was aware of the plans.
The central bank is understood to have filed a petition in the Bombay High Court on Monday to ensure its position is considered before any court ruling on Tata Sons’ public listing, which could mark the start of a protracted legal battle between the central bank and India’s largest conglomerate. The decision follows a letter from the RBI on Saturday in which Tata Sons rejected its request for deregistration, which would have forced it to proceed with a public sale of shares.
Since Tata Trusts Chairman Noel Tata and the majority of the trustees wish to maintain the confidentiality of Tata Sons, the holding company may seek court intervention. Mint This was reported on September 12.
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Tata Trusts urges Tata Sons to seek review and clarification from the Reserve Bank of India (RBI) on its decision to require a public listing before resorting to legal action.
The RBI rejected Tata Sons’ application for deregistration as a principal investment company as it found that the request did not meet the necessary criteria, necessitating a public listing.
A public listing may result in increased regulatory oversight and investor scrutiny, which will impact Tata Sons’ internal decision-making processes and capital allocation.
While some trustees favor a public listing, others, including Tata Trusts Chairman Noel Tata, prefer to retain private control, leading to a difficult decision that weighs regulatory compliance against governance concerns.
Tata Sons is expected to discuss its options at an upcoming board meeting, which could include seeking further clarification from the RBI, before considering any legal issues.
“Is this battle over?” joked a Tata Group executive when asked about the RBI filing an objection, suggesting it is prepared to fight a potential legal challenge from the Tata Group.
“We will do our best. As of now, the legal route is the only option. But before that, Tata Trusts wants Tata Sons to ask the RBI to reconsider its decision and clarify why it rejected its application. Then they will take the legal route. All this is expected to be discussed at the board meeting,” the executive said, referring to the Tata Sons board meeting on September 17.
Haze board
The meeting will be the first since N. Chandrasekaran announced on August 12 that he would not seek a third term at the head of the conglomerate. It is unclear whether the Tata Sons board led by Chandrasekaran will support its major shareholder Tata Trusts in challenging the RBI order or go against it, the second executive said. This comes as two trustees – Venu Srinivasan and retired defense minister Vijay Singh – have changed their earlier stance and now support the listing of Tata Sons. Singh was removed from the Tata Sons board in September last year, while Srinivasan remains one of the fund’s two nominees. Apart from Chandrasekaran, Noel and Srinivasan, Tata Sons’ board of directors includes group chief financial officer Saurabh Agrawal and independent directors Harish Manwani and Anita Marangoli George.
While some of Noel Tata’s opponents have actively lodged complaints while remaining as trustees, the Tata Trusts chairman has routinely responded to such moves since he took over in October 2024, three Tata executives said.
A few months ago, Singh filed a complaint against a smaller Tata trust associated with Sir Ratan Tata Trusts (SRTT), accusing it of wrongdoing. Srinivasan also complained that the number of permanent members of the SRTT was in violation of the rules. These complaints led the Maharashtra Charity Commissioner to bar SRTT from holding board meetings or taking official decisions. Former trustee Mehli Mistry has also filed several cases against Tata Trusts.
Search for a Chairman
Developments on the listing front have muddled the Tatas’ plans to find a new chief executive for Bombay House. A five-member panel to select Chandrasekaran’s successor can be formed only after it includes representatives from both the Sir Dorabji Tata Foundation and the Sir Ratan Tata Foundation.
Queries emailed to Tata Sons, Tata Trusts and RBI seeking comment on the situation remained unanswered.
One lawyer called the RBI filing one of the “saddest days” in corporate India.
“If it comes to litigation between the House of Tata and the Reserve Bank of India, it will be one of the saddest days in our corporate history,” said Nitin Potdar, an independent corporate lawyer in Mumbai. “The RBI took 29 months to decide on the simplest application in the Tata Sons case. When Shanghvi Finance went down the same route, it went overboard within three months. Two similarly situated applicants were treated differently and no reason was published for either of them. This is not a matter for the courts. This is an issue that should sit down at the negotiating table and resolve this issue in the interest of Indian business. If this is how the Indian regulator treats the House Tata, the world will draw its own conclusion.”
Exit from the fight
In September 2022, RBI named Tata Sons as one of India’s largest non-banking financial companies and required it to go public by September 2025. Over the past four years, the RBI has been working on defining a top-tier principal investment company and Tata Sons tried to get out of this category.
The central bank defines a CIC as a non-banking financial company (NBFC) that has at least 90% of its assets in shares, bonds or loans within group companies.
In March 2024, Tata Sons repaid its entire standalone debt amounting to almost ₹22,000 crore and asked it to cancel its registration as a principal investment company in a bid to avoid a possible public listing. However, in a letter dated September 11 to Tata Sons Chief Financial Officer Saurabh Agrawal, the RBI said, “After considering the above and examining all relevant factors, we advise that your request for voluntary surrender of CoR (Certificate of Registration) for classification as an unregistered CIC (Core Investment Company) cannot be granted.”
“We, therefore, advise you to immediately take necessary steps to ensure full compliance with all guidelines/instructions applicable to NBFC-Upper Tier (UL) issued by RBI.”
As of now, neither the RBI order nor the latest letter seen by Mint has specified a timeline for when Tata Sons, the group’s parent company, which owns shares in 26 listed companies and has private businesses, should go public.