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Setback for Lodhas in dispute over control of MP Birla Group

Court-appointed committee not to support Lodha's reappointment as director.

, ET Bureau|
Updated: Aug 13, 2019, 11.50 AM IST
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Agencies
Harsh-Vardhan-Lodha
The development comes as the MP Birla companies have listed resolutions for the reappointment of Harsh Lodha at annual general meetings (AGMs).
A court-appointed committee has decided not to support a resolution seeking Harsh Vardhan Lodha’s reappointment as director on the board of the MP Birla Group’s three listed entities — Birla Corporation, Vindhya Telelinks and Birla Cable. Lodha, who currently heads the group, has challenged the move in the Calcutta High Court.

The Administrator Pendente Lite (APL) committee oversees the operations of the company until there’s a final order in the decade-and-a-half-old dispute between the Birlas and the Rajendra Lodha family over control of the MP Birla Group.

“APL committee (having control over majority shareholdings in companies in MP Birla Group including Vindhya Telelinks and Birla Cable) does not support the resolution for reappointment of HV Lodha as a director of Vindhya Telelinks and Birla Cable,” said the committee in its July 30 report, which ET has reviewed. “The committee supports in principle the resolution for payment of profit-based remuneration to non-executive directors of Universal Cables, Birla Corporation, Vindhya Telelinks and Birla Cable.”

The three-member APL committee is headed by former Bombay High Court chief justice Mohit Shah.

‘No Controversy’

The other two members are MK Sharma, former vice chairman of Hindustan Unilever, and chartered accountant AC Chakraborty.

In its 20-page report, the committee also said: “However, the committee does not support the payment of profit-based remuneration to non-executive chairman of above-mentioned companies up to 0.75% of net profit of the company.”

Harsh Lodha has asserted that “there is no controversy (over) the estate of the late Priyamvada Devi Birla” as her shareholding is specified in an undisputed affidavit of assets. The APL committee is seeking to “exercise voting rights in respect of shares not owned by the estate” of the late Priyamvada Devi Birla, Lodha has argued, challenging various decisions taken lately by the APL committee in the high court.

He said the division bench of the Calcutta High Court had in 2012 ruled that the APL committee can “exercise all such rights which flow from the ownership of shares” of the estate of the late Priyamvada Birla. But the APL committee cannot exercise any right in respect of assets/shares not mentioned in the affidavit of assets”.

Citing various orders passed by the high court, Lodha has contended that the APL committee is “required to act unanimously” and not by majority.

The development comes as the MP Birla companies have listed resolutions for the reappointment of Harsh Lodha at annual general meetings (AGMs).

Lodha had approached the Calcutta High Court to challenge the APL committee’s report soon after it was issued in July 30. On August 2, the court had said that since the companies had already started the process for holding an election for reappointment of directors, it wasn’t inclined to stay this. But the companies can’t declare results for six weeks or before the court issues an order, whichever comes first.

Justice Sahidullah Munshi had said the matter would next be heard by the court on August 30.

The APL committee also expressed unease over Lodha looking to trademark the name and logo of the MP Birla Group of companies, educational activities and hospital services through Birla Corp.
Birla-dispute

“In order to ensure that even in case of the plaintiffs (HV Lodha) not succeeding in the probate petition, investment companies in tier I and tier II and the charitable trusts and societies will not be able to use the name and logo of MP Birla group of companies which bloomed during the lifetime of Smt PD (Priyamvada Devi) Birla,” the committee said. “This is an issue of serious concern.”

The APL has asked the Registrar of Trade Marks in Kolkata not to proceed with the registration of any trademark, trade name or logo of MP Birla Group without prior approval of the high court.

Priyamvada Birla, the widow of MP Birla, bequeathed her assets of around Rs 5,000 crore to chartered accountant RS Lodha on her death in July 2004. As soon as RS Lodha, who died in 2008, approached the court to probate the will, the Birla family challenged it and sought probate over two earlier wills. Later, in 2008, the Birlas had sought the court’s intervention to appoint administrators.

The Birla family has challenged the authenticity of the above will and argues that the group assets should go to charities as per the mutual will of MP Birla and Priyamvada Birla made in 1982. Currently, RS Lodha’s son Harsh Lodha spearheads the MP Birla Group.

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