Harsh Vardhan Lodha to Continue as the Chairman of the MP Birla Group: Calcutta High Court

INTRODUCTION

On Thursday, the Division Bench of the Calcutta High Court, consisting of Chief Justice TS Sivagnanam and Justice Sabyasachi Bhattacharyya, said in a verdict that the Court can’t interfere with the functioning of the companies, trusts and societies of the MP Birla Group, thereby barring the administrators from intervening in the functioning of the group. The mandate of the administrators will now only extend to the shares owned by the late Priyamvada Devi Birla.

The Division Bench directed that the trial in the probate petition – to establish the will’s legal validity – should resume at the earliest.

BACKGROUND

Priyamvada Devi Birla had bequeathed her estate to her trusted advisor and confidant, Rajendra Singh Lodha, through a registered will dated April 18, 1999. After her death, RS Lodha became the Chairman of the MP Birla Group. Several members of the extended Birla family challenged the will, commencing a legal battle across various courts and judicial forums. Harsh Vardhan Lodha is the son of RS Lodha, who died on October 3, 2008.

Immediately after the death of Priyamvada Devi Birla, six factions of the extended Birla Family from whom her husband had distanced himself, staked claims in the estate. After years of legal battle, starting from the Calcutta High Court to the Hon’ble Supreme Court, it finally culminated on March 31, 2008, when the Hon’ble Court at the Centre threw out all the challenges to the late Priyamvada Devi Birla’s will from members of the extended Birla family, while imposing a fine of INR 2,50,000 for starting a frivolous litigation.

A single judge of the Calcutta High Court had earlier given full authority to a panel of three administrators — one each nominated by the Birla and Lodha families and a retired judge — to take control of the entire estate of the late Priyamvada Devi Birla. The judge in September 2020 passed an order directing the removal of Harsh Vardhan Lodha as the chairman of the MP Birla Group on the basis of a contentious concept of “extended estate”.

The Birlas had simultaneously launched another attack on RS Lodha, seeking to remove him as the executor of the estate. Though a verdict of a single judge of the Calcutta High Court in May 2006 went against Lodha, a division bench of the same court ruled in his favour in October 2007. The legal challenge against Lodha acting as the executor ended in April 2008, when the Birlas withdrew their petition in the Supreme Court. Lodha’s death in October 2008 triggered the beginning of a new round of legal challenges against his son.

CONTENTIONS OF THE APPELLANTS

The appellants – Lodha, represented by the Fox and Mandal Law Firm, – argued that in the past five years, relentless attacks were mounted on Harsh Lodha and certain other directors and trustees of the MP Birla Group on the basis of convoluted interpretation of the late Priyamvada Birla’s Estate.

The petitioners further argued that alongside, taking advantage of the legal battle, rogue executives of some trusts and societies have gone to extreme lengths to damage the interests, assets and properties of these societies.

CONTENTIONS OF THE RESPONDENTS

The respondents – The Birla Family, represented by law firm Khaitan & Co., – argued that the Division Bench had modified the order of the single judge to a limited extent – partly in favour of the appellant and partly in favour of the respondent. Most importantly, the order of the single judge restrained Harsh Vardhan Lodha from holding any office in any of the entities in MP Birla Group has not been modified by the Court and the said restraint on Harsh Lodha continues.

It was argued that further, the third member of the Administrator Pending Litigation (APL), who is a retired judge of the High Court, has been permitted to exercise veto power for the effective administration of the estate in case of conflict of decision between the two members of the APL and they said that they will take further course of action after reviewing the order fully.

RATIONALE AND THE JUDGEMENT OF THE COURT

There cannot be universal or dynamic injunction. The Court could not do such a thing simply because the testatrix (Priyamvada Devi Birla) could not herself have taken such an action in law.

Referring to the administrators, the judges said they cannot jump steps to directly take (decisions) or pre-empt business decisions of entities under their direct control. Referring to the late Priyamvada Devi Birla, the verdict said that her personal charisma and influence among different companies and their management, even if existed during her lifetime, unfortunately went with her and cannot form a bundle of heritable right to be part of her estate.

The Division Bench also said that the administrators should bear in mind that they are not an “adjudicating authority” and are merely “merely the representative of the estate of the deceased testatrix” and directed that the trial in the probate petition should resume at the earliest.

After the review, the Division Bench of the Calcutta High Court unanimously ruled in favour of Harsh Vardhan Lodha continuing as chairman of the Rs 16,000 crore MP Birla Group, reversing the three-year-old judgement of a single judge of the Court. The ruling dealt a blow to the Birlas in the protracted legal battle with the Lodha family over the estate of the late Priyamvada Devi Birla.

The Birlas are now likely to challenge the verdict in the Supreme Court, setting the stage for the final leg of the 19-year-old legal battle between the two storied business families, said people close to the Birla family.

Aditya Pratap is a lawyer and founder of Aditya Pratap Law Offices. He practices in the realm of real estate, corporate, and criminal law. His website is adityapratap.in and his media interviews can be accessed at http://www.youtube.com/@AdityaPratap/featured. Views expressed are personal.

This article has been assisted by Kush Shanker, a 2nd-year law student pursuing B.B.A.LL.B. (Hons.) from Maharashtra National Law University, Aurangabad.