Lodha vs Birla: Calcutta High Court allows Harsh Vardhan Lodha to continue as Chairman of MP Birla Group

In a breather for Harsh Vardhan Lodha, the Calcutta High Court on Thursday allowed him to continue as the Chairman of the MP Birla group of companies and restricted the 'administrators pendente lite' (APL) from interfering with the day-to-day operations of the group [Universal Cables Limited vs Arvind Kumar Newar]..A division bench of Chief Justice TS Sivagnanam and Justice Sabyasachi Bhattacharyya was dealing with a clutch of appeals filed by Lodha and four companies of the Birla group challenging the September 18, 2020 order of a single-judge who had restrained Lodha from holding the post of Chairman in the group..The September 2020 order was passed after few members of the 'extended' Birla family questioned the validity of the Will of Priyamvada Devi Birla, wife of MP Birla. She was the Chairman of the group till her death on July 3, 2004 but by virtue of a Will prepared in April 1994, she had bequeathed her nearly ₹25,000 crore estate to her advisor and former chartered accountant RS Lodha.Subsequently, RS Lodha held the Chairman's position till his death in October 2008. However, the 'extended' Birla family members challenged the same and three administrators were therefore, appointed to oversee Priyamvada's estate.After RS Lodha's death, his second son Harsh Vardhan Lodha took over as the Chairman but he was restrained by the September 2020 order. He however, continued as the Director of some of the companies..On Thursday, the bench 'modified' the September 2020 judgment. It observed, "The APL, cannot interfere with all internal affairs of the companies of all the tiers with the blessings of the testamentary court. There cannot be any universal or dynamic injunction or direction affecting the future course of action of the companies from the testamentary court, simply because the testatrix (Priyamvada Devi Birla) could not herself had taken any such action in law.".The APL, for example, cannot jump steps to directly take (decisions) or pre-empt business decisions in respect of the entities not under their direct control, the judges said.The bench, however, clarified that as and when any major decision is required to be taken regarding transactions/transfers of the shares themselves, the APL mandatorily has to approach the testamentary court for necessary orders. "Also, the APL itself, being the repository of interest of the estate as the representative of the testamentary court, shall have to take appropriate directions and orders from the testamentary court prior to initiating or contesting any litigation. However, day-to-day decisions at every stage of such litigation need not be sought from the court, which would be an unnecessary burden on the court and would put an unwarranted spanner in the wheels of the APL," the Court observed..The bench while referring to the 'influence' of Priyamvada over the entire group of companies, said that her powers were restricted to her ownership of the particular shares in different companies. It added that the APL must not confuse the expression ‘controlling interest’ with ‘personal influence’ of Priyamvada.."Whatever might have been the 'personal influence' of the deceased testatrix, the same was intangible and restricted to herself. The charisma or personal influence of the deceased might have helped her in carrying out her will in the affairs of the companies, but do not comprise of tangible incidents of her property or Estate," the Court opined..Therefore, the Court held that the 'controlling interest' (of the APL) would only mean the 'heritable incidental rights' such as voting rights, rights to participate in shareholders' meetings etc."Her personal charisma or influence among the different companies and their managements, even if existent during her lifetime, unfortunately went with her and cannot form a bundle of heritable rights to be part of her estate," the bench underscored.As regards the contention of the APL passing 'drastic orders' compelling or pressuring the companies of the group to implement the same, the Court emphasised that the APL is not an adjudicating authority."The APL must also keep in mind that it is not an adjudicatory authority but merely the representative of the estate of the deceased testatrix," the bench underlined.With these observations, the Court disposed of the appeals..The Court also said that the origin of this dispute is the will of Priyamvada Birla which has been long pending and must now be expeditiously decided without any delay. .Senior Advocates Darius Khambata and Abhrajit Mitra along with Advocate Kunal Vajani (Jt. Managing Partner of Fox & Mandal) assisted by Advocates Debanjan Mandal (Managing Partner, Fox & Mandal), Sanjiv KrbTrivedi, Iram Hassan, Sanket Sarawgi and Mahima Cholera appeared for Lodha. Senior Advocates Shyam Divan and Ranjan Bachawat represented Birla Corporation Limited.Senior Advocates SN Mookerjee, SK Kapur and Ratnako Banerjee represented the Birlas. .[Read Judgment]