Calcutta HC removes Harsh Vardhan Lodha from ₹25,000-crore MP Birla empire2 min read . Updated: 19 Sep 2020, 06:09 AM IST
This order is a significant victory for the extended Birla family, which is contesting the legal validity of Priyamvada Birla’s will.
The Calcutta high court on Friday ordered the removal of Harsh Vardhan Lodha from directorships and other positions in the trusts and societies of the MP Birla Group of companies.
The court’s ruling is a significant victory for the extended Birla family, which is contesting the legal validity of Priyamvada Birla’s will, in which she bequeathed her estate and control of the now ₹25,000 crore MP Birla empire to her chartered accountant R.S. Lodha and his second son Harsh Vardhan Lodha.
The two sides have been locked in a legal battle for 18 years to control the MP Birla group flagship Birla Corp. and other companies.
Lodha will now be removed as chairman of cement maker Birla Corp. and as a director on the boards of other group companies, including publicly traded Vindhya Telelinks Ltd, Birla Cables Ltd and Universal Cables Ltd.
In May, a two-judge division bench of the Calcutta high court had allowed Lodha’s reappointment as director by rotation in some of these firms. Lodha was also specifically entitled to a profit-related commission in these firms, which was approved at the companies’ annual general meetings.
The Birla family challenged this appointment in the Supreme Court, but it redirected the case to the high court.
On Friday, the court said all majority decisions taken by the court-appointed Administrator Pendente Lite committee (a panel of administrators appointed in 2012) will be binding on Lodha and that he will be obliged to implement them. In 2019 and 2020, the committee had directed Lodha’s removal from the boards and had refused to support the payment of any profit-linked remuneration to him, but these decisions were not implemented.
“These directions mean that Harsh Vardhan Lodha immediately ceases to hold all positions in the MP Birla Group, including as director in the companies and other positions in the trusts and societies of the MP Birla Group," a Birla family statement said. “The court held that since the companies are not parties to the testamentary proceedings, directions cannot be passed against them, but the decisions of the committee of administrators shall be implemented by Lodhas, who are plaintiffs in the testamentary proceedings. His stranglehold on the MP Birla group has been brought to an end by the Calcutta high court."
A lawyer for Lodha group said the order will be challenged. “The verdict by Justice Sahidullah Munshi over the reappointment of Harsh Vardhan Lodha as a director of Vindhya Telelinks Ltd and Birla Cable Ltd does not appear to be lawful," said Debanjan Mandal, partner, Fox & Mandal, lawyers for Harsh Vardhan Lodha. “Our clients’ confidence in the system remains completely unshaken, and our clients will challenge the judgement for immediate and long-term relief."
A Lodha statement said: “It has all along been the case of the Lodhas that the probate court examining the validity of a will has no jurisdiction over any company in which the Late Priyamvada Birla held shares."
“The company will examine the judgement and take necessary steps, including filing of appeal because the verdict seems to have ignored shareholders’ democracy and their right to elect by majority of their votes a person as a director of a company. Shareholders have elected Harsh Varshan Lodha as a director of Birla Corp. with an overwhelming majority of 98%. Mr Lodha, being otherwise not disqualified from holding the office of director, there is no reason why the verdict of shareholders will not be respected," a Birla Corp. spokesperson said.