The share switch was raked up in current months as a combat for management broke out amongst stakeholders within the Tata universe, and was seen as a transfer to embattle Tata Trusts chairman Noel Tata, because the matter associated to the shares he inherited, based on complainants. This resolution will come as a aid to Noel Tata, who is about to consolidate his management over the enterprise empire with chairman N Chandrasekaran having introduced his resolution to maneuver on on the finish of his time period early 2027.
In an order dated September 2, reviewed by ET, State Charity Commissioner Amogh S Kaloti mentioned the Belief had established that the sale was necessitated by tax issues, was backed by correct documentation and valuation, and complied with the legal guidelines relevant on the time.
ET BureauThe order, nonetheless, doesn’t carry the restraint imposed by the Charity Commissioner on the Sir Ratan Tata Trust (SRTT).
Additionally Learn: Tata Sons succession search stalls as regulatory hurdle blocks Trusts’ nominee
No Authorized Bar
In Could, the Charity Commissioner had issued the restraint beneath Part 36A(1) of the Maharashtra Public Trusts Act following complaints concerning the composition of the SRTT board and alleged non-compliance with Part 30A(2) of the Act, a vital space that offers the permissible variety of perpetual or life trustees on the board. A current modification to the legislation launched a statutory cap on the variety of perpetual trustees who can serve on a public belief board.The Charity Commissioner discovered that the 1989 resolution to promote the shares was neither sudden nor arbitrary. The Belief had begun contemplating a doable sale as early as 1984 after an modification to the Earnings Tax Act threatened the tax-exempt standing of charitable trusts holding securities that weren’t among the many prescribed investments.
The Central Board of Direct Taxes subsequently declined to recognise NRTT as a nationwide belief in November 1988, exposing the Belief to tax liabilities on its Tata Sons shares.
“… Existence of necessity is a query of reality. Subsequently, it have to be considered within the context of the information and circumstances of the related time. This authority finds that the stand of the NRTT that the switch of shares was necessitated by an exterior statutory compulsion which threatened the tax-exempt standing and corpus of the Belief is properly based and might due to this fact be accepted,” the order states.
Additionally Learn: Tata Sons AGM deferred for lack of quorum, first in group’s history
Tax legal responsibility
In keeping with the order, the Belief’s data confirmed a possible tax legal responsibility of ₹4.23 lakh for evaluation years 1986-87 to 1988-89 alone. The Charity Commissioner mentioned the necessity to eliminate the shares arose to keep away from the tax legal responsibility and protect the Belief corpus.
The order additionally attaches significance to the truth that Naval Tata had resigned as a trustee of NRTT with impact from January 1, 1988. The Charity Commissioner famous that the resignation was formally reported to the assistant Charity Commissioner and the change report was accepted in February 1990.
The proposed transaction was subsequently examined by eminent lawyer Nani A Palkhivala. In his December 1988 opinion, Palkhivala concluded that there was no authorized bar on Naval Tata buying the shares as he was now not a trustee. He suggested that the sale happen after a yr had elapsed from his resignation and beneficial restrictions to make sure that the shares remained throughout the Tata household.
The shares had been valued at ₹1,914 every, based mostly on the valuation adopted for wealth-tax functions. Naval Tata subsequently agreed to buy the 833 shares at that worth and accepted situations proscribing their switch exterior the household.
The transaction was formally accomplished on January 18, 1989. The share switch type recorded complete consideration of ₹15.94 lakh, whereas the Belief’s stability sheet confirmed a revenue of ₹8.15 lakh from the sale. The Charity Commissioner famous that the switch had additionally been permitted by the Tata Sons board and was supported by the requisite documentation.
Correct docs in place
In its remaining findings, the Charity Commissioner mentioned NRTT had established all 5 key parts examined within the case: that the sale was pushed by the tax state of affairs prevailing on the time; correct documentation existed; the consideration was based mostly on a longtime valuation and resulted in a revenue for the Belief; restrictions ensured that the shares remained throughout the recipient’s household; and the switch complied with the legislation then in power.
Importantly, the order additionally leaves the door open for former Tata Sons chairman Ratan Tata’s will to be challenged, because it establishes the primacy of an endeavor by his father Naval Tata throughout the time of the unique share switch that his kids wouldn’t switch it exterior of the Tata household.
“Trustees of NRTT are at liberty to take applicable steps, whether it is discovered that late Ratan N Tata has bequeathed his shares equally to another charitable establishments in breach of the situations hooked up to the switch of shares and the categorical endeavor by Naval H Tata that his kids would switch or bequeath the shares to their very own family and to not a 3rd celebration,” the order states.
The Charity Commissioner has additionally described the conduct of NRTT trustee Vijay Singh as “unbecoming of a Trustee”, questioning his resolution to first approve the legality of the 1989 share switch after which, two days later, search an unbiased inquiry into the exact same transaction.
The order notes that Singh permitted a board decision on June 8, 2026, which recorded that the switch of 833 Tata Sons shares owned by NRTT to Naval H Tata on January 18, 1989, was a sound transaction. Nevertheless, on June 10, Singh wrote to the Charity Commissioner in search of an unbiased inquiry into the matter.
“….It is extremely stunning, to say the least, that Vijay Singh on eighth June agreed within the assembly of the board of trustees that the share transaction was authorized and legitimate, and on tenth June questioned the legality and validity of the exact same transaction, which was broadly reported within the newspapers. It’s acknowledged within the NRTT’s reply that the mentioned electronic mail of Vijay Singh just isn’t obtainable with the Belief, which signifies an intention on his half to suppress this from the opposite trustees and the Belief as a complete. This motion on his half has resulted in damaging the popularity and goodwill of the Belief. In that sense, conduct of Vijay Singh was unbecoming of a trustee of NRTT,” the order states.
The controversy surrounding the 1989 switch had intensified after Tata Trusts vice chairman Vijay Singh wrote to the Maharashtra Charity Commissioner in search of an unbiased inquiry into the switch of shares from NRTT to late industrialist Naval H Tata, saying, “Since Noel Tata, a direct beneficiary of the share switch, is presently chairman of the Tata Trusts, it may very well be inferred {that a} denial authorised by him does create a conflict-of-interest state of affairs, with out casting any aspersions on anybody,” the letter acknowledged.
The request adopted a authorized discover acquired by Singh alleging that the transaction amounted to an unlawful alienation of public charitable belongings into personal fingers.
Suresh Tulsiram Patilkhede, represented by advocate Katyayani Agrawal, alleged that the share switch happened on January 18, 1989, every week after Naval Tata resigned as a trustee of the Belief. In keeping with the illustration, the switch lacked authorized necessity, was not supported by a sound instrument of switch and was carried out with out consideration, rendering it illegal beneath ideas governing public trusts.
The Trusts then had categorically denied any suggestion of impropriety on the a part of the Sir Dorabji Tata Belief, Navajbai Ratan Tata Belief or any of the events concerned within the transaction.
