Tata Sons listing: Does RBI have the power to enforce it? We asked a few legal experts

Reserve Bank of India (RBI) has asked Tata Sons to list on the stock exchange, but legal experts say the directive could be tested in court.

"Where is the power to force someone to list?" argued Nitin Potdar, senior corporate and M&A lawyer. He pointed out that under the Companies Act, a company can choose to remain private, and even the Securities and Exchange Board of India (SEBI) only steps in once a company decides to list on its own.

HP Ranina, senior advocate at the Supreme Court and a former RBI board member, said Potdar had raised a valid point and that the issue could have a constitutional dimension if it reaches court. "Can you change my constitution? Can you force me to do something?" he said.

Ranina said other regulations applicable to a company with more than ₹1 lakh crore in assets could still apply, but the question of ownership and going public was separate. He added that the court's decision could not be predicted.

Tata Sons was classified as an upper-layer non-banking financial company (NBFC) by RBI in 2022, a category that carries a listing requirement. The company later repaid its debt and applied to surrender its Core Investment Company (CIC) registration, but RBI rejected the application on September 11. RBI's latest FAQs clarify that being debt-free does not by itself take a company outside the regulatory framework. The rules also consider access to public funds, including funds accessed indirectly through group and associate companies.

Potdar also pointed to the structure of foundation-owned industrial groups globally, saying governments generally do not require such foundations to change their shareholding structure or go public. “Please understand you are disturbing the whole fabric of the foundation by introducing a profit-motive shareholding,” he said.

Ranina says RBI could still apply other rules that come with overseeing a company holding more than ₹1 lakh crore in assets, separate from the listing question. He said some compromise could be possible, while reiterating that the question of ownership and going public was a valid point for consideration if the matter reaches court.

The listing issue comes alongside a separate dispute over the leadership at Tata Sons. Noel Tata, who heads the Tata Trusts, opposed N Chandrasekaran's reappointment as chairman for a third term.

Ranina said Tata Sons' articles of association require the agreement of the two nominee trustees representing Tata Trusts for the appointment of a new chairman. He said Chandrasekaran had earlier made it clear that he did not want to continue after his current term and argued that, in the absence of unanimity, he should stick to that position.

Potdar added that one of the two trusts has been barred by the Charity Commissioner from holding meetings pending a decision, a separate legal complication that could itself require a court petition to resolve.

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