- Justice Nariman’s opinion demands directors exercise independent judgment.
- He deemed Tata Trusts’ strict nominee directive protocol illegal.
- This opinion informs ongoing Tata Sons-Trusts governance dispute.
An April 2025 legal opinion by former Supreme Court judge Justice R.F. Nariman has come into focus amid the ongoing governance dispute between Tata Sons and its majority shareholder Tata Trusts.
The opinion held that directors nominated by Tata Trusts to the Tata Sons board cannot merely follow directions from the Trustees and must exercise independent judgment while discharging their duties as company directors.
What Justice Nariman’s Opinion Said
Dated April 13, 2025, the opinion was given by Justice Nariman while examining a proposed protocol under which nominee directors of Sir Dorabji Tata Trust and Sir Ratan Tata Trust would be required to vote or abstain in accordance with guidance received from the Trustees.
The protocol followed a resolution passed by the two Trusts on October 17, 2024.
Under the proposed arrangement, nominee directors dealing with resolutions concerning specified provisions of Tata Sons’ Articles of Association were required to consult the Trustees on how they should vote. They would then have to vote or abstain in accordance with the guidance received and could also be asked to raise resolutions before the Tata Sons board.
The protocol further provided that if a nominee director did not vote, abstain or otherwise act in accordance with the Trustees’ guidance or request, the Trustees would immediately review whether that director’s nomination should be withdrawn.
Section 166 Of Companies Act In Focus
Justice Nariman examined the arrangement in the context of Section 166 of the Companies Act, 2013, which sets out directors’ fiduciary duties.
These include the obligation to act in good faith in the interests of the company and its stakeholders and to exercise due and reasonable care, skill, diligence and independent judgment.
He also relied on the Supreme Court’s March 26, 2021 judgment in Tata Consultancy Services Limited v. Cyrus Investments Pvt. Ltd. and Others, which considered, among other issues, the position and duties of directors nominated by charitable trusts.
Justice Nariman said the Supreme Court’s observation that an institutional shareholder could have an idea of the stand to be taken at an upcoming board or general body meeting could not be interpreted as removing a nominee director’s obligation to exercise independent judgment.
“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 said in the opinion.
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He added that a nominee director could take the Trustees’ views into account while independently considering his fiduciary obligations to Tata Sons.
“He can voice the opinion of the trustees together with applying his mind to other relevant matters including his fiduciary obligations to the company of which he is a director,” Justice Nariman said.
Protocol Deemed Contrary To Law
According to Justice Nariman, requiring a nominee director to vote or abstain strictly in accordance with guidance from the Trustees, with the possibility of removal for failing to do so, would run contrary to the statutory obligation to exercise independent judgment.
Concluding his April 13, 2025 opinion, Justice Nariman said, “It is my opinion therefore that this Protocol would be contrary to the law, i.e. the Companies Act 2013 and the aforesaid Supreme Court Judgment dated 26 March 2021.”
Why The Opinion Matters In Current Tata Sons-Trusts Row
The opinion predates the current dispute between Tata Sons and Tata Trusts and dealt with a related but distinct question — whether Tata Trusts could direct its nominee directors on how to vote and require compliance with such guidance.
The latest differences between Tata Sons and Tata Trusts concern the holding company’s governance, including the reappointment of N Chandrasekaran as Tata Sons chairman and the proposed listing of the company.
At its September 17, 2026 board meeting, Tata Sons approved Chandrasekaran’s reappointment for another five-year term and moved towards a stock market listing.
Tata Trusts Chairman Noel Tata, one of the Trusts’ two nominee directors on the Tata Sons board, opposed the decisions, while the other nominee director, Venu Srinivasan, supported them.
Tata Trusts subsequently challenged the validity of Chandrasekaran’s reappointment, arguing that Tata Sons’ Articles of Association require the affirmative support of a majority of the Trust-nominated directors.
With only two Trust nominees on the board, the Trusts contend that both must vote in favour for the requirement to be satisfied. Tata Trusts, which holds approximately 66 per cent of Tata Sons, has said the September 17 resolution therefore had no legal effect.
What Justice Nariman’s Opinion Does Not Decide
Justice Nariman’s April 2025 opinion is relevant to the current governance debate because it distinguishes the rights of Tata Trusts as a shareholder from the statutory duties of directors nominated by the Trusts once they sit on the Tata Sons board.
However, the opinion does not directly decide the separate question now in dispute over how Tata Sons’ Articles of Association apply to the affirmative voting rights of Trust-nominated directors in the appointment or reappointment of the chairman.
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