Inside the Tata Trusts rift: Two trustees question the Tata Sons restructuring plan

The tussle within Tata Trusts has intensified after two senior trustees of the Sir Dorabji Tata Trust (SDTT), Venu Srinivasan and Vijay Singh, questioned the process through which the trust backed a restructuring proposal for Tata Sons, reported The Economic Times.In a September 30 letter to SDTT trustees, Srinivasan and Singh said they were not consulted before a September 28 letter supporting the proposed restructuring was sent to the Tata Sons board. They also said they learnt about the accompanying public statement from public sources, as per the report. The two trustees said no meeting of SDTT trustees was held to discuss or deliberate on the proposal before the letter was sent.“As no meeting of the Trustees of SDTT authorised the Letter or the Press Release, neither can be said to reflect the collective, institutional position of SDTT,” they said, according to the letter reviewed by ET. The development adds another layer to the growing dispute within Tata Trusts, which holds a 66% stake in Tata Sons, over governance and the future of the group's holding company.WHAT ARE THE TRUSTEES QUESTIONING?The September 28 proposal called for the merger of Tata Electronics Systems Solutions Private Limited (TESS) and Tata Consulting Engineers (TCE) with Tata Sons. Tata Trusts had said the restructuring would help Tata Sons cease to qualify as an NBFC or a Core Investment Company (CIC), potentially taking the company outside the regulatory framework that has created its mandatory listing requirement.But Srinivasan and Singh have questioned whether the September 28 letter could be treated as the institutional position of SDTT when the trustees had not collectively deliberated on it.They have also questioned whether a shareholder should direct the Tata Sons board to approve a restructuring that falls within the board's independent decision-making responsibilities.“A shareholder may express its considered wishes or propose a course of action to a company, but decision-making on that proposal is a matter entrusted to the company’s Board,” the trustees said, adding that the board should independently assess the legal, regulatory, financial and commercial implications of the proposal.The proposed restructuring involves the merger of two operating companies, regulatory approvals and the surrender of Tata Sons' certificate of registration, with potential implications for the holding company and its group companies, employees and regulators, the trustees said.The trustees have also questioned the restructuring proposal in the context of the RBI's September 11 response to Tata Sons' application to surrender its registration.According to the letter, the RBI had directed Tata Sons to comply with the norms applicable to an NBFC-Upper Layer.Srinivasan and Singh said decisions taken by the trusts in 2025 were made before the RBI's latest response and therefore could not automatically be treated as determining the options currently available to Tata Sons.This is significant because Tata Trusts' September 28 restructuring proposal has been presented as a possible route to change Tata Sons' regulatory status and potentially avoid the mandatory listing requirement.CONCERNS OVER CHARITABLE STATUSThe two trustees have also raised concerns about the possible implications for the charitable status of the trusts.They questioned whether the Trusts' communication with Tata Sons could have consequences if it were interpreted as the Trusts directing commercial decision-making at the group holding company.“This is an issue which the Trusts had fought during RNT’s time,” the trustees said, referring to Ratan Naval Tata. They also questioned whether the current actions could put the position of the trusts and the value of their underlying assets at risk.They have called for collective deliberation among SDTT trustees before any institutional position is taken.The trustees said SDTT's decisions derive their legitimacy from collective deliberation and proper governance processes, and that trustees should have an opportunity to consider relevant material before communication is made in the trust's name.VIJAY SINGH SEEKS GOVERNANCE PROBEThe latest letter follows an earlier escalation by Vijay Singh himself.Singh, who is vice chairman of Tata Trusts and a trustee of SDTT, had approached the Maharashtra Charity Commissioner seeking an immediate inquiry into the administration and governance of SDTT, including its involvement in the commercial and strategic affairs of Tata Sons, according to an earlier ET report.He had argued that SDTT's substantial shareholding in Tata Sons should not mean that the trust assumes the functions of a commercial enterprise or participates directly in Tata Sons' business affairs.Singh had also sought consequential action if the inquiry found grounds for it, including suspension or removal of trustees where warranted. He sought directions to restrain SDTT and its board from undertaking certain administrative actions while the inquiry was under way.The earlier move came after Venu Srinivasan also sought an inquiry into Tata Trusts' governance, including questions around Noel Tata's position as a perpetual trustee, his chairmanship of Tata Trusts and the appointment of Neville Tata as a trustee.TATA SONS LISTING BATTLE IN THE BACKGROUNDThe latest dispute comes as Tata Trusts and Tata Sons remain locked in a separate but closely linked battle over the holding company's future structure.Tata Sons is facing a mandatory listing requirement because of its classification as an Upper Layer NBFC. Tata Trusts has been looking for a way to keep the holding company private.On September 28, Tata Trusts proposed merging TESS and TCE with Tata Sons. The Trusts said the resulting entity would have substantial operating revenues and would neither qualify as an NBFC nor a CIC.The proposal still requires consideration by the Tata Sons board and regulatory approvals, including a no-objection certificate from the RBI.The latest letter from Srinivasan and Singh now questions whether the Trusts had properly authorised the proposal in the first place and whether the Tata Sons board should independently decide its merits.The dispute therefore now spans both the governance of Tata Trusts and the future structure of Tata Sons, with the two issues unfolding against the backdrop of the unresolved listing question.- Ends