On Episode 988 of The Core Report, financial journalist Govindraj Ethiraj talks to HP Ranina, Supreme Court advocate, chartered accountant, and expert on Indian tax and corporate laws.

SHOW NOTES

(00:00) Stories of the Day

(01:13) Oil Prices Steady As Markets Watch US-Iran Talks In New York

(02:04) Why A Diesel Shortage In The West Could Become A Global Challenge

(05:52) A Fresh Bull Case For Gold

(08:06) Does The Reserve Bank Have The Powers To Force A Company To List, In This Case Tata Sons?

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NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on feedback@thecore.in.

Good morning, it's Thursday, the 24th of September and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital.

Our top stories and themes…

Oil prices are steady as markets watch US-Iran talks in New York.

Why a diesel shortage in the West could become a global problem.

A fresh bull case for gold.

And does the Reserve Bank of India have the powers to force a company to list, in this case, data science.

Markets, UN General Assembly, Diesel and Passenger Shortages

All eyes are on New York City where the United Nations General Assembly and its proceedings there because quite frankly, where else could you look right now in an era devoid of reason and diminishing hope. US President Donald Trump, of course, at the United Nations delivered on brand on Tuesday after he threatened to annihilate Iran and then predictably added his envoys had held productive and lengthy talks with mediators of Iran to end the war. So mark the bombs and not the words is all one can say.

US President Donald Trump and Chinese President Xi Jinping are expected to meet this week for their second in-person summit of the year. Reports suggest that artificial intelligence is going to figure prominently in that discussion and we'll of course update you. Meanwhile, oil prices now are at a two-week low thanks to Gulf crude supplies picking up and of course those talks between Iran and the United States.

But diesel is the talk of the town as we discussed yesterday as well with diesel refining margins hitting a record high on top of restrictions of US diesel exports. Brent crude futures before we come back to diesel are at about $100.40 a barrel or just over $100 a barrel, a figure which is seen as steady right now. Reuters reports that European low sulphur gas oil's premium to Brent crude futures hit a record of $95 a barrel after President Trump said he backed the idea of a diesel export ban to lower prices in the United States that have hit record highs thanks to a global supply shortage.

But a move to ban exports could worsen rather than help high energy prices according to analysts. The Wall Street Journal is reporting that US oil executives and lobbies rushed to register their opposition to a ban with several calling the president's lieutenants and congressional Republicans. But now they said it seems inevitable the US will move forward with some measure limiting their fuel shipments.

But even if that measure is temporary, US oil companies stand to lose billions of dollars in revenue if they're not allowed to ship diesel abroad. The industry is making the case that export controls won't just hurt its profits banning US diesel shipments even for a temporary period, according to US oil executives, would spur international prices for the fuel to skyrocket. This would lift prices for several goods across the board, which the US imports from other countries.

Executives also told the Wall Street Journal that some countries or other countries might take retaliatory measures curbing supplies to the United States as they absorb higher transportation costs. Now, the reason we're talking about this in some detail on the core report today is not so much that the US is facing high diesel prices. But once again, the problem of underestimating or not even thinking about second and even third order impact of policy actions, particularly those taken in haste.

And yes, India does not have a diesel shortage as such, at least now, thanks to the strong refining capacity that we have, as an analyst from Kepler also pointed out on the show yesterday. With all of this in the background, including the fact that oil prices are holding around that $100 a barrel mark, Indian markets were positive. The Sensex rose 299 points to close at 74,828.

And the Nifty 50 was up 117 points to 23,446. In the broader markets, the Nifty mid cap and small cap were up 0.7 and 0.9% each. We track macroeconomic signals quite closely, including of course, the automotive sector, which we faithfully report every month.

But the other one that is important and must be watched more closely is air traffic. India's domestic air passenger traffic has now declined marginally 0.18% year on year between January and August 2026, according to data from the Directorate General of Civil Aviation, according to a report in the Economic Times. The decline in itself is not much except that this is supposed to be and expected to be a growth market and growth two years ago was over 7% for domestic aviation, but slowing since then for various reasons.

We should also remember that several airlines, including the biggest like Indigo and Air India have cut back sharply on services as they grapple with high fuel prices, thanks to the war that started in the end of February this year. On the other hand, airfares are high for consumers thanks to lower supply or lower supply in contrast to demand. The Economic Times said that passengers carried by domestic airlines between January and August 2026 stood at about 11.05 million as compared to 11.07 million for the corresponding period of the previous year, thus the negative 0.18% number.

Passenger load factors also have declined. Akasa Air though has reported the highest load factor at 87%, but that itself is down from about 95% in July. SpiceJet is at 80%, Indigo 79%, Air India Group's load factor is 77% from 83%.

A Fresh Case for Gold

Could gold prices rise again? Here is the case for it. First, gold prices have rebounded about 8.5% from their 2026 calendar year low as on 22nd September, following a 26% decline from the year-to-date peak after the Middle East conflict and the sharp rise in the U.S. 10-year real yield. A note from Elara Securities, the brokerage says that while near-term headwinds remain, structural factors including rising U.S. fiscal risks, the declining safe haven appeal of U.S. Treasury bonds, the re-emergence of sanctions, sustained retail and central bank demand from China, all of this support a positive long-term outlook for gold.

Picking up on a few of them, Elara is saying that U.S. fiscal risk and its spillover to the U.S. dollar is the primary structural tailwind for gold as it's compelling central banks to diversify their reserves. The return of sanctions, this time on Iran's financial and commodity assets, is likely to keep other central banks on course to further diversify away from paper assets, and global central banks are continuing to buy gold as a strategic, non-sanctionable, zero-counterparty risk reserve asset rather than a tactical trade. This year, central banks have purchased about 130 tonnes of gold and this compares to what 160 tonnes purchased in the same period last year.

Elara's analysis suggests that a record 45% of global central banks were adding to their gold reserves on a year-on-year basis as on the second quarter of the current financial year, led by Poland, China and Brazil. And then there's more from China. China's demand for gold, both reserves diversification and investment for capital appreciation, is another structural tailwind.

China's gold reserves form only about 8% of total foreign exchange reserves, which is about half of India's share. India is about 17%, the U.S. is 81%, UK 18%, and similar to Japan, which is again about 8.5%. But the People's Bank of China says the report reported a 20-tonne gold reserve addition in August 2026 alone and this was the largest monthly increase since October 2023. The expectation is that the People's Bank of China and authorities will diversify more towards gold as price opportunities emerge and domestic non-gold investments stay muted.

Does the RBI have the powers to force a company to list

Let's get back to the Tata Sons controversy. There are two elements I felt it would be worth going deeper into. One track of the controversy is the Reserve Bank of India asking Tata Sons to list itself, a move that has been opposed by its principal shareholder Tata Trusts, which owns about 66% of Tata Sons and is represented by Noel Tata.

The second part is to do with the continuation of N Chandrasekharan as chairman of Tata Sons following his earlier decision not to offer himself for re-election at the end of his 10-year term in February next year. And then there are the trusts, somewhat mysterious entities because of how they are set up and governed. I posed both sets of questions to H.P. Ranina, prominent Supreme Court advocate, chartered accountant, and an expert on Indian tax and corporate laws based in Mumbai.

He also sat on the board of the Reserve Bank of India as director for 11 years. I began by asking him if the Reserve Bank of India had the powers to ask Tata Sons to list.

INTERVIEW TRANSCRIPT

H P Ranina: The Reserve Bank of India is a statutory corporation set up under the Reserve Bank of India Act 1934. Now, if you look at the very preamble of the Act, it says that it is to regulate certain financial systems and financial companies. And then there are certain sections, one of them is Section 45JA, which says that they have the power to issue directions in the public interest and in order to bring about financial stability in the economy.

So that's good. 45JA is very clear that this is the power that they have. But then they have specifically stated that their power can only be exercised for certain issues.

If you permit me, I will just read them out from the book itself, from the section itself. It says the power to give directions first for income recognition. Secondly, for accounting standards.

Third, for making of proper provision for bad and doubtful debts. Fourth, capital adequacy based on risk weights for assets and credit conversion factors for off-balance sheet items. And deployment of funds by a non-banking financial company.

So these are the five items which are mentioned on which the RBI has been given power under 45JA to issue directions. And then subsection two says without prejudice to the generality of the powers vested under subsection one, the following can also be done. Number one, maximum amount of advances or the financial accommodation or investment in shares and other security for the paid up capital and deposits of the company.

So they can put restrictions on these items like accounting standards, capital adequacy, how much they can invest in another company in form of shares and securities. But the power to change the ownership structure by saying that from a private company you first become public and then you issue the shares on the stock market to an IPO. That power is not there.

So RBI is a creature of the statute. It's a corporation. It's not a government of India.

It's a corporation. And the corporation is vested with certain powers under the Reserve Bank of India Act. And this power to direct a company to list is nowhere found in the Reserve Bank of India Act.

So my view is that this regulation or this direction is ultra-virus in a section, the ultra-virus in the RBI Act itself. And RBI does not have the power to issue such directions. This is a matter which will go to court if RBI insists.

Govindraj Ethiraj: Right. And several companies have gone public or have listed because they were in similar situation or seen as being in a similar situation. So would they have done that because they felt the Reserve Bank breathing down their neck or was it because they benefited either ways?

H P Ranina: No, they may have done it even today. Tata Sons can also go public if they so wish. But as I explained to you, to do that, you have to have a shareholders meeting.

Now if 66% of the shares are held by these public charitable trusts and they are opposed to it, the special resolution cannot be passed because to pass a special resolution to change the articles, you need 75% shareholding approval. So if they don't do it, they can't do it. If they can't go public, they can't issue shares in an IPO because you must be a public company to issue shares.

You must have so many because articles have to be changed. Currently, the articles say you only have so many shareholders, not more than 50. In a private company, you can't have more than 50.

So you do go public and remove that restriction, increase the number of shareholders.

Govindraj Ethiraj: Right. But the way the Reserve Bank is seeing it, it's not at this point acknowledging that there is a battle between two sets of shareholders and saying that you as Tata Sons have to go public, isn't it?

H P Ranina: Yeah, but under what power, what section of the RBI Act do they have the right to issue in this direction? That is my question. I don't find any such power.

I've read the RBI Act several times over. I don't find any power and as I said, RBI is a creature of the statute. It can only exercise powers which are vested in it by the law, the Reserve Bank of India Act.

Govindraj Ethiraj: And in your time at the Reserve Bank, and you spent more than a decade there on the board, you've never seen a similar situation where the Reserve Bank has asked a company or in this case, a non-bank finance company to list?

H P Ranina: No, never. And this is never brought up to the board. Because I'm sure if it had been brought up to the board, we would have pointed out that this, you don't have the power to do so.

Because everybody must act within the powers. So this will be unconstitutional. Also realise that as a shareholder, you can't tell a shareholder how to vote.

Can RBI or even the government of India tell a shareholder how to vote? Because damn they say, you must vote and make it into a public company. This would infringe my fundamental rights.

So it's a constitutional problem. This is unconstitutional. Not only illegal, it's unconstitutional against the constitution of India, where I have the freedom to act the way I want.

Yeah, RBI says you go public. So I'm forced to convert my private into public by changing my articles. How can you force me to vote?

Govindraj Ethiraj: Right. Like I said, from the Reserve Bank's point of view, it's really asking the entity that's Tata Sons to list. Of course, in deference to your point that they don't have the powers to do that.

And Tata Sons to figure out how to get the consensus for converting to a public company, which in turn will list.

H P Ranina: If they want to. So if they want to do it voluntarily, they can do it even today. That's not an issue.

As you said, other companies have done it. But that's for other reasons, not because of RBI directions.

Govindraj Ethiraj: Right. Okay, let me come to the other question, which is for trust. Now, Tata Trusts are entities which are regulated by the Charities Commissioner of Mumbai, which is a unique institution in itself, as in it's not seen in other parts of the country.

I mean, in any other part of the country, and therefore has to be understood perhaps a little differently from others. So what do we know, understand of how a trust is governed and behaved? And I think which leads to the second question of how much power does the managing trustee of a trust have or a trust appointed person in this case on Tata Sons have?

H P Ranina: It all depends on the trust deed. You see what is the meaning of a trust? A trust means that the settlor says I trust my future trustees to act according to my wishes.

That's why it's called a trust. Now you can even set up a private trust. You can say that I want my assets to be put in a private trust and I want my trustees to distribute the assets to my heirs in such a ratio as I didn't say.

So trust means what is stated in the trust deed. So the deed of trust is a crucial thing. It's like the articles and memorandum association of a company.

I cannot go beyond my trust deed. Please understand that. That is why, for example, trust deed says that if you want to, that two trustees must give a positive affirmative vote for appointment of CEO of Tata Sons Limited.

This is mentioned in the trust deed. Similarly, if the man has resigned or retired to find a successor, the trust says you must appoint a selection committee of five persons, three of whom are from Tata Sons and two must be outsiders. So all this is laid down in the Tata trust deed.

You cannot change the Tata trust deed. You cannot change any trust deed without going to the court. The principle of law is that if suppose a trust fails and you cannot go by the objects, you cannot fulfil the objects for which the trust was originally set up, then you to go to the court and get what is called a CPRE decree.

I'll give an illustration. There was an old trust which was meant for relatives of soldiers who had died in World War II. Now many of the, after maybe almost now 70-80 years, World War II ended in 1945.

So now it is 71 years old. Many of them have died. Nobody remains.

So now if you go to the charity commission, it says, okay, now there are no survivors of World War II, survivors of any war. So the closest object to the original object will be permitted by the charity commission and you can change the object. But otherwise, the trust deed is sacrosanct.

It cannot be changed. It is binding on all future trustees. Right.

And in this case, would we know what the trust deed contains? Yes. As I told you, these are two trusts, Ratan Tata Trust and Naurabi Tata Trust, together hold 66%.

Now in both these trustees, it has been said that if you want to appoint the chairman or CEO of Tata Sons, in which the trusts have 66% shareholding, then it must be done only with the approval of the nominee of the trust who are sitting on the Tata Sons board. So in this case, Noel Tata, nominee of Ratan Tata Trust, objected to Mr. Chandrasekharan's appointment being extended by another five years. Therefore, because of this objection, he cannot be appointed because the Tata Sons articles say that unless it is approved by the nominees of Tata Trust, he cannot be done.

Govindraj Ethiraj: Right. One of the questions that's being raised is what is the real power of a managing trustee of a trust?

H P Ranina: That power is also to be given only the trust deed. Many trusts don't have the concept of a managing trustee. Some trustees have it.

But if there's no power, if there's no managing trustee, then all the trustees are jointly liable and they have to take a decision. And again, the trustee normally says, normally, that if there's a difference of opinion, that the majority will prevail. And if the two votes are equally distributed, say three to three or four to four, then the chairman of the trust will have the right to give a casting vote.

So that's again spelt out in the trust deed. That's the point. That's the constitution of a trust.

Govindraj Ethiraj: Right. So I asked you about the Charities Commissioner, Mumbai, because these trusts are, they're regulated by them or him in this case. Now, to what extent is this different from other trusts elsewhere in the country?

And are there factors or facets which are unique to the way a Charities Commissioner Mumbai operates?

H P Ranina: Yes. And again, Charity Commissioner, there's a law, Maharashtra Charities Act. Earlier it used to be called the Bombay Public Trust Act.

That when Maharashtra was formed, because at that time, Bombay was part of Gujarat and Bombay was part of Bombay Presidency during British Raj. Then we became independent, that is, Maharashtra state and Gujarat state. Now, the Bombay Public Trust Act has now been converted to the Maharashtra Public Trust Act and Gujarat Public Trust Act.

So in Gujarat also this law applies. So he is a regulator, but he cannot override the trust deed. Even he's bound by the trust deed.

And if he says that the trust deed says one thing, that he's bound by that. So trust deed is supreme. That is an important point which you must bear in mind.

Certain regulations are there. For example, Charity Commissioner says that you must file annual report to Charity Commissioner's office. If a new trustee is appointed, you must inform the Charity Commissioner by filing a change report.

If a trustee resigns, you must file a change report. So those regulatory issues are governed by the law, but ultimately it's the trust deed which prevails.

Govindraj Ethiraj: Right. Mr. Ranina, thank you so much for joining me.

H P Ranina: My pleasure. Thank you, Govind.