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Published on: Oct. 10, 2020, 12:13 p.m.
Birlas versus Lodhas
  • The Calcutta High Court, where the legal wrangle is taking place

By Sajal Bose. Deputy Editor, Business India

The Birlas and the Lodhas are involved in a never-ending legal wrangle over the control of M.P. Birla group. And, now, the case has taken a new twist, when, on 18 September 2020, a single bench of the Calcutta High Court restrained director Harsh Vardhan Lodha from holding any position in the group. 

“Harsh Vardhan Lodha is restrained from holding any office in any of the entities of M.P. Birla group during the pendency of the suit,” said Justice Sahidullah Munshi, in his order. The court also restrained Lodha from drawing any benefits personally from the estate of the late Priyamvada Devi Birla during the pendency of the testamentary suit. It further directed that the decision of the Administrator Pendente Lite (APL) Committee be implemented. The committee was formed in 2012 and had major disagreements with Lodha.

Incidentally, the trial court of Calcutta High Court is also hearing a probate application by Lodha, whose late father R.S. Lodha had claimed that Priyamvada Devi Birla had bequeathed her estate, comprising the M.P. Birla group, to him through a will. This contention was challenged by the Birlas. 

In May, the Birla family challenged the reappointment of Harsh Vardhan Lodha as director of two of the M.P. Birla group companies – Birla Cables and Vindhya Telelinks. Lodha had retired from these posts, but was reappointed in 7 May 2020 during the AGMs of the two companies. Under special resolutions, Lodha was also declared entitled to profit-related commissions in both firms.

“The judgment was necessary to protect and preserve the estate and function without any interference,” says N.G. Khaitan, senior partner, Khaitan & Co and counsel for the Birlas.

Challenging the verdict

However, the judgment was regarded as a setback for Lodha. “The verdict passed by Justice Sahidullah Munshi of the Calcutta High Court on 18 September, regarding the reappointment of Harsh Vardhan Lodha as a director of Vindhya Telelinks Ltd and Birla Cable Ltd in 2019, does not appear to be lawful,” says Debanjan Mandal, partner, Fox & Mandal, advocates for Lodha. “Our clients’ confidence in the system remains completely unshaken and they will challenge the judgment in the Appeal Court for immediate and long-term relief.”

Lodha, chairman, M.P. Birla group, as also Univesal Cables, Birla Cables and Vindhya Telelinks, has filed appeal against the order in a division bench of the Calcutta High Court of Chief Justice T.B. Radhakrishnan Nair and Justice Shampa Kar. Following the hearings over few days, the division bench, on 1 October, declined to issue an ad interim stay on the single bench order, which had restrained Lodha from holding any office of the M.P. Birla group of companies. “The prayer for the ad interim stay of the judgment and order impugned dated 18 September 2020 is declined,” order stated.

The division bench also clarified that the restriction on Lodha during the pendency of the suit relates ‘to the strength of the shares referable to the estate of PDB’. The clarification prompted the Lodha camp to claim that the interim order has ‘significantly relaxed the restrictions’. “Lodha was reappointed director in all the four listed companies with at least 98 per cent votes cast in his favour and not on the strength of the estate of PDB. So, the order paves the way for his continuing to hold offices in these companies,” argues Mandal.

But Birlas’ counsel Khaitan accuses Lodha camp for misleading people. “It is a ridiculous claim by the opponent,” he counters. “The 1 October order of the division bench has widened the scope of the trial court judgment by asking Lodha to ‘abide by’ the direction. PDB’s estate has a controlling interest in all the companies and trusts of the group, which the division bench has affirmed.” Khaitan has also threatened to file a contempt of court petition, if Lodha is allowed to chair any meeting by the board members of any company of the group. 

The tussle had started in 2004, when the late Rajendra Singh Lodha – father of Harsh Vardhan – was handed the reins of the M.P. Birla group by a contentious will of the late Priyamvada Devi Birla, wife of the late Madhava Prasad Birla. The group is in diverse business segments, such as cement, cables, jute and industrial chemicals and has a net worth of Rs9,000 crore.

It seems a conclusion of this 16 year-long battle is a long way away. The Birla family is united in the fight against the Lodhas. For them, it is a battle for pride against an outsider, rather than material gains. “Our clients are fighting against the greed,” contends Khaitan.

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