Bengaluru/Mumbai, Aug. 12 -- Natarajan Chandrasekaran's decision to step down as Tata Sons chairman and not seek another term followed a months-long standoff with Tata Trusts chairman Noel Tata over the performance and strategic direction of some of the group's new businesses, according to people familiar with the matter.

The decision came eight days before the Tata Sons annual general meeting, scheduled for 18 August, and caught Noel Tata and most of the Tata Trusts trustees off guard, two executives aware of the development said.

On Wednesday evening, Chandrasekaran called about two dozen senior Tata Group executives to Starbucks on the ground floor of Bombay House, the corporate headquarters of Tata Sons, according to people aware of...