Tata Trusts may urge Tata Sons to seek RBI review of public listing order before legal action

Mumbai: Tata Trusts want 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 taking legal recourse, two group executives aware of the plans said.

The central bank is understood to have filed a caveat in the Bombay High Court on Monday to ensure its position is heard before any judicial order on the public listing of Tata Sons, which could mark the start of a protracted legal tussle between the central bank and India's largest conglomerate. The decision follows RBI's Saturday letter rejecting Tata Sons' request to surrender its registration, which would force it to proceed with a public share sale.

Since Tata Trusts chair Noel Tata and most trustees desire to keep Tata Sons private, the holding company could seek court intervention, Mint reported on 12 September.

“Is it a battle drawn?” quipped a Tata Group executive when asked about RBI filing a caveat, suggesting it is prepared to fight a potential legal suit from the Tata Group.

“We will do everything it takes. For 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 plea. Then they will take the legal route. All this is expected to be discussed in the board meeting,” said the executive, referring to Tata Sons’ board meeting on 17 September.

Board haze

The meeting will be the first since N Chandrasekaran on 12 August said he will not seek a third term at the conglomerate's helm. It is unclear whether the Tata Sons board, led by Chandrasekaran, will support its main shareholder Tata Trusts in challenging the RBI order or go against it, the second executive said. This is because two trustees -- Venu Srinivasan and retired defence secretary Vijay Singh -- have changed their earlier position, and now support listing Tata Sons. Singh was removed from the Tata Sons board last September, while Srinivasan remains one of the Trusts' two nominees. Besides Chandrasekaran, Noel and Srinivasan, the Tata Sons board includes group CFO Saurabh Agrawal and independent directors Harish Manwani and Anita Marangoly George.

According to the three top Tata executives, while some of Noel Tata's opponents have proactively filed complaints while remaining trustees, the Tata Trusts chairman has typically reacted to such moves since taking over in October 2024.

A few months ago, Singh filed a complaint against a smaller Tata trust linked to Sir Ratan Tata Trusts (SRTT), accusing it of wrongdoing. Srinivasan also complained that the number of permanent members at SRTT is breach of rules. These complaints caused the Maharashtra charity commissioner to stop SRTT from holding board meetings or making official decisions. Former trustee Mehli Mistry too has filed multiple challenges against Tata Trusts.

Chairman search

Developments on the listing front have muddled Tatas' plans to find a new leader for Bombay House. A five-member panel to choose Chandrasekaran’s successor can be formed only after getting representatives from both Sir Dorabji Tata Trust and the Sir Ratan Tata Trust.

Queries emailed to Tata Sons, Tata Trusts and RBI seeking comment went unanswered.

One lawyer termed RBI's caveat filing as one of the “saddest days” in corporate India.

"If it comes to litigation between the House of Tata and the Reserve Bank of India, that will be among the saddest days in our corporate history,” said Nitin Potdar, a Mumbai-based independent corporate lawyer. “The RBI took 29 months to decide the simplest of applications in the case of Tata Sons. When Shanghvi Finance took the same route, it was out of the framework in three months. Two similarly placed applicants received different treatment, and no reasons were published for either. This is not a matter for the courts. It is a matter for the two of them to sit across a table and resolve, in the interest of Indian business. If this is how India's regulator treats the House of Tata, the world will draw its own conclusion”.

Exit struggle

In September 2022, RBI tagged Tata Sons as one of India's largest non-banking financial companies, requiring it to go public by September 2025. Over the last four years, the RBI has worked to define an upper-layer core investment company, and Tata Sons has tried to exit this category.

The central bank defines a CIC as a non-banking finance company (NBFC) that has at least 90% of its assets in shares, bonds, or loans within group companies.

In March 2024, Tata Sons paid off all its separate debt of nearly ₹22,000 crore and asked it to deregister as a core investment company, trying to avoid a possible public listing. However, in a letter dated 11 September to Tata Sons' chief financial officer Saurabh Agrawal, RBI said: “After considering the above and examining all the relevant factors, we advise that your request for voluntary surrender of CoR (certificate of registration) for being classified as unregistered CIC (core investment company) cannot be acceded to”.

“As such, we advise you to take necessary actions to ensure full compliance with all guidelines/instructions, as applicable to NBFC-Upper Layer (UL) issued by the RBI, immediately”.

For now, neither RBI’s order nor the latest letter seen by Mint gives any deadline for when Tata Sons, the group’s main company that owns shares in 26 listed companies and has private businesses, must become publicly listed.