Consumers of the media are being continuously fed this information that not much is known about the internal working of Tata Trusts. To ascertain the veracity of this statement, it would be useful to step back a little and enquire why Tata Trusts was set up in the first place. Many years ago, Jayaprakash Narayan had observed in the context of Tata Trusts: “The concept of trusteeship fostered by Mahatma Gandhi received a much-needed fillip in Tata enterprises… True to the ideals of its founder, the House of Tata has always promoted this concept of trusteeship and today more than 85 per cent of its profits go to the trusts.”
Tata Trusts has helped the Tata Group realise the societal purpose, which is the key mission of the Tatas. At different points of time, members of the Tata family had bequeathed their personal wealth and assets (which also included their shares in Tata Sons) to these trusts. It is to these trusts that the country owes the Indian Institute of Science, Tata Institute of Fundamental Research, Tata Memorial Hospital, Tata Medical Centre, National Centre for the Performing Arts, National Institute of Advanced Studies, Tata Institute of Social Sciences, JRD Tata Centre for Ecotechnolgy... the list goes on. Giving back to society many times over, not the control of Tata Sons, was the predominant purpose of the existence of the trusts.
Two questions in this context are worth deliberation: Is Tata Trusts regulated? Is anything known about its working? Like any other public charitable trust in Maharashtra, these trusts are regulated by the Maharashtra Public Trusts Act. These trusts are also registered under the Registration Act, 1908, and with the Income Tax Act, 1961, and the Foreign Contribution (Regulation) Act, 1976. The registration under the Maharashtra Public Trusts Act requires filing of audited accounts and the annual activity report of the trusts with the state charity commissioner. Tata Trusts has an easily accessible and active website, which informs the public of its mission and objectives, activities — the projects the trusts support through grants, scholarships and endowments, the names of the trustees, the sources and uses of funds and the income and expenditure. That being the case, it is far from the truth that the working of the trusts is not known.
The Trust Acts in India lay down the standards of care of trust property. Trustees are inter alia required to inform themselves about the state of the trust property. Unlike companies in which the doctrine of corporate personality prevails, for trusts, trustees hold the assets in trust for the beneficiaries. There are no Indian case laws on the subject, but an oft-quoted case in British law is Bartlett vs Barclays Bank Trust Co Ltd. Judge Brightman J in his judgment comprehensively discussed the duties of trustees in connection with companies whose shares are part of the trust property.
The judgment goes on to say that the duty of a trustee is not to take such care only as a prudent man would take if he had only himself to consider; the duty rather is to take such care as an ordinary, prudent man would take if he were minded to make an investment for the benefit of other people for whom he felt morally bound to provide. In the case of Tata Trusts the responsibility to protect the assets of the trusts and be informed of the assets thus vests with the trustees. The rationale also implies that trustees as shareholders of Tata Sons have an interest in the optimisation of the income by way of dividends, so that the trusts can carry out their societal objectives.
The trustees would be well within their right to seek information about the capital allocation of Tata Sons. Seeking such information would fall in the domain of “legitimate purposes, performance of duties or discharge of legal obligations”, which are the grounds provided under Regulation 3(1) of the Sebi (Prohibition of Insider Trading) Regulations, 2015, for procurement or communication of any insider of unpublished price-sensitive information.
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The subtext of the statement about the failure of corporate governance in Tata Group and the absence of free hand, seems to be the issue of legitimate control exercised by Tata Trusts as the largest and majority owner of the unlisted company, Tata Sons. But one does know clearly, at least not too apparent, if such a control was not always being exercised for decades. Or that, maybe, that was not necessary as the chairmen of Tata Sons and Tata Trusts were common by custom and practice. This helped preserve the continuity and natural harmony between the societal objectives of the trusts, Tata Sons and the Tata companies.
In his last days, Jamsetji Tata had urged his cousin R D Tata and close members of his family to carry forward the work he had started: “If you cannot make it greater, at least preserve it. Do not let things slide. Go on doing my work and increasing it but if you cannot, do not lose what we have already done.” The successors of Jamsetji Tata till today have not only continued, but also expanded his work. That work should not be allowed to stop, nor the clear stream of reason be allowed to lose its way or the lofty ideals of the group be clouded by narrow personal gains.
The series is concluded. The first part appeared on Wednesday.
The author is a former executive director of the Securities and Exchange Board of India; an independent director in Tata AIA Life Insurance Company Ltd; and chairman of Tata Trustee Company Ltd; pratipkar21@gmail.com
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