Calcutta HC sets aside Lodha’s plea3 min read . Updated: 28 Aug 2010, 12:26 AM IST
Calcutta HC sets aside Lodha’s plea
Calcutta HC sets aside Lodha’s plea
The Birla family has won a small victory in a long war.
The Calcutta high court on Friday ordered the appointment of three independent administrators to the estate of Priyamvada Birla, setting aside MP Birla Group chairman Harsh Vardhan Lodha’s application, filed after his father Rajendra Singh Lodha’s death in 2008, to administer the estate.
Also See Fighting It Out (PDF)
The MP Birla Group is named after Priyamvada Birla’s husband Madhav Prasad Birla, who died in 1990. Priyamvada Birla, who died on 3 July 2004, bequeathed her estate to R.S. Lodha, close confidant and a director of the MP Birla Group, through a will written and registered in 1999.
M.P. and Priyamvada Birla did not have any children.
At stake is an estate that includes properties across India; a bungalow in the prized Birla Park residential enclave in Kolkata; and four listed firms, which have a combined market capitalization of Rs3,376 crore.
Though judge Kalyan Jyoti Sengupta did not immediately name the administrators, he said one of them would be a lawyer, one, an expert on accounting, and the third, a person with considerable experience of running businesses.
“This order shifts control of the estate from disputed people," said S.K. Birla, chairman of the eponymous group and one of the elders in the extended Birla family. “It would make sure that the assets of the estate aren’t moved till the court has decided on the wills," he added.
Harsh V. Lodha refused to comment. His lawyer Debanjan Mandal said he was likely to contest Friday’s order.
The same judge had passed a similar order appointing an administrator to the estate in May 2006, but that order was set aside on appeal. But then R.S. Lodha, the executor of Priyamvada Birla’s will, was alive; now, Harsh V. Lodha is trying to replace his father as the “administrator".
If Friday’s order is upheld by the appeals courts, it would give the administrators control of the holding companies of the MP Birla Group “because their ownership can be traced back to the estate", according to a lawyer from the Birla camp, who did not want to be named.
But even collectively the group’s holding companies do not own “controlling stake" in any of the four listed firms of the group—Birla Corp. Ltd, Universal Cables Ltd, Vindhya Telelinks Ltd and Birla Ericsson Optical Ltd.
The administrators could have substantial voting rights in the listed firms, but they would not be able to control them, according to a lawyer from the Lodha camp, who did not want to be identified.
“There are huge cross holdings among the listed companies," he said. For instance, Universal Cables owns 29% of Vindhya Telelinks, and Vindhya Telelinks owns 21% of Universal Cables.
Priyamvada Birla directly held very few shares in the listed firms—1,260 shares in Birla Corp., 500 in Vindhya Telelinks, 42,003 in Universal Cables and 72,241 shares in Birla Ericsson.
Thanks to the support of the managements of the holding firms, Harsh V. Lodha could become chairman of the MP Birla Group after his father’s death, crushing legal challenges.
After his father’s death on 3 October 2008, Harsh V. Lodha filed an application with the Calcutta high court seeking appointment as the administrator of the estate till he had obtained probate of the will, or the court’s approval of the succession plan.
The will said the estate was to go to Harsh V. Lodha after his father’s death.
Along with him, two sisters of M.P. Birla also filed similar applications seeking appointment of an administrator to the estate. They, too, oppose the Lodha family’s claim to the estate.
The Birlas have been challenging the 1999 will. They claim the estate was to go to charitable trusts under irrevocable wills written jointly by M.P. Birla and his wife in 1982. The Lodhas claim the 1982 wills were “legitimately cancelled and the trusts dissolved".
Though elders such as K.K. Birla and B.K. Birla initially led the legal challenge to R.S. Lodha’s claim to the estate, Aditya Birla Group chairman Kumar Mangalam Birla is now leading the Birla family in the legal battle, according to S.K. Birla.
K.K. Birla has died, and B.K. Birla is 90 now, he said, adding, “Kumar Mangalam, on the other hand, has access to the best legal brains in India."
To be sure, different courts had ruled against the involvement of the Birlas, saying they did not have any “legitimate interest" in the estate. The Birla family separated their business interests and properties through a family settlement in the mid-1980s.