Birla-Lodha Battle | 'Only Civil Courts Can Conclusively Decide Issues Of Title': Calcutta HC Allows H.V. Lodha To Continue As MP Birla Group Chairman

More than 3 years after a Single Judge of the Calcutta High Court had passed an order directing removal of MP Birla Group Chairman, H.V. Lodha from the positions he held in the various Companies, Trusts and Societies of the M.P. Birla Group on the basis of a concept of “extended Estate” of Priyamvada Devi Birla, a Division Bench on Thursday granted major relief to the Lodhas by unequivocally determining that a Testamentary (Probate) Court cannot get into the domain of Companies, Trusts and Societies, its functioning or management.

The division bench comprising Chief Justice T.S. Sivagnanam and Justice Sabyasachi Bhattacharyya observed, “A testamentary court cannot decide issues of title conclusively; such power lies purely within the domain of civil courts. However, while deciding an application under Section 247 of the Indian Succession Act for appointment of administrator pendente lite, the testamentary court may decide the extent of the estate of the deceased testator/testatrix prima facie.”

The ruling came in a batch of intra court appeals directed against the order (dated 18.09.2020 in G.A No. 43 of 2016 etc. APO Nos. 89, 90, 91 and 95 of 2020) which were filed by four companies namely Universal Cables Limited (UCL), Birla Cables Limited (BCL) and Vindya Telelinks Limited (VTL) and Birla Corporation Limited (BCRL).

The matter concerned the estate of late Smt. Priyamvada Devi Birla, wife of late Shri Madhav Prasad Birla. Notably, the estate of the late Priyamvada Devi Birla, former chairperson of the MP Birla Group, is currently under the custody of a three-member committee of administrators. The three-member committee, the Administrators Pendente Lite (APL), was appointed by the Calcutta High Court in 2012.

Priyamvada Devi Birla died on 3rd July, 2004 leaving behind her last registered Will dated 18th April, 1999 under which she gave all that she owned to Mr. R.S. Lodha. Immediately after her death, 6 members of different factions of the other Birla families from whom she and her husband were separated, contested the will, leading to a legal battle.

After the demise of R.S. Lodha in 2008, his son Harsh Vardhan Lodha assumed leadership in the legal battle against the Birlas, asserting his rights to the considerable wealth associated with Birla Corp and securing chairmanship positions in various group companies.

In 2012, the Calcutta High Court appointed a three-member committee known as Administrators Pendente Lite (APL) of the Estate of Priyamvada Birla (APL Committee). Fast forward to September 18, 2020, Justice Sahidullah Munshi, of the Calcutta High Court, issued a restraining order against Harsh Vardhan Lodha, preventing him from holding any office within the entities of the M.P. Birla group during the ongoing legal proceedings.

Noting that the initial proceedings with a probate application for the estate of Priyamvada Devi Birla before the high court commenced in 2004, the Court asserted, "In view of the inordinately long pendency of the proceeding, we part with the matter with the hope and trust that the testamentary court shall ensure that the letters of administration suit is disposed of expeditiously, without granting any unnecessary adjournment to either side."

The Court in its 300-page long judgement, directed that the three-member APL cannot interfere with all internal affairs of the companies of all the tiers.

The Court said, “The APL, thus, 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 could not herself had taken any such action in law.”

The Court said that the APL in registering its nominees as members of the companies where the deceased testatrix held shares, in consonance with and in the ratio of the shareholding rights of Priyamvada Devi Birla in each of such companies, was perfectly justified in law.

The Court further said that the APL, through its nominees, may very well decide which way the votes of the testatrix's shares should go and how they would exercise their voting rights and election of directors.

The Court also said that the nominees, as such shareholders, may participate in shareholders' meetings and decision-making processes of the tier-one companies and thus mould the course of action and business decisions of such companies.

"Since the said tier-one companies are also shareholders of other companies in the secondary and tertiary tiers, the APL, through its nominees, may also decide how to go about asserting the interests of the estate of PDB in the secondary and tertiary tier companies through the tier-one companies' actions as shareholders of the latter companies," the Court added.

The court said that since the tier-one companies are also shareholders of other companies in the secondary and tertiary tiers, the APL, through its nominees, may also decide how to go about asserting the interests of the estate of Priyamvada Devi Birla in the secondary and tertiary-tier companies through the tier-one companies' actions as shareholders of the latter companies.

The Court emphasized that the APL cannot jump steps to directly take or pre-empt business decisions in respect of the tertiary-tier companies without going through the process of first taking decisions in the first-tier companies and getting its decisions approved through the representation of the first-tier companies as shareholders in the lower tier companies.

The Court directed, “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.”

The Court also directed that 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 added.

While noting that the very composition of the APL brews conflict of interest, since two of the members represent the two warring factions, the Court opined the only way in which the APL can function effectively is for the third member, who is necessarily a retired nominated Judge, to act as arbiter in case of conflict of decision between the other two members of the APL.

In case there is no resolution, the Court said that the third member shall exercise veto power; and further in case of major decisions (which decisions are 'major' for this purpose shall be decided by the third member), the APL may seek appropriate orders from the testamentary court.

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 Court stated.

A press statement by Fox & Mandal, counsel for Lodhas, said, “In the past 5 years relentless attacks were mounted on him and certain other Directors and Trustees of the companies, trusts and societies of the M.P Birla Group on the basis of a convoluted interpretation of the Estate of Late Priyamvada Devi Birla. Taking advantage of the Court battle, certain rogue executives of some of the Societies have gone to extreme lengths to damage the interests of the assets and properties of the Societies. Our client reaffirms his faith in the legal system that the perpetrators of such heinous crimes who personally benefited from properties of charitable trusts and societies will be adequately punished.” 

Mr. H.V. Lodha was represented by Mr. Darius J. Khambata, Senior Advocate, Mr. Abhrajit Mitra, Senior Advocate, Mr. Kunal Vajani, Jt. Managing Partner, Fox & Mandal who were instructed by the team of Fox & Mandal led by Mr. Debanjan Mandal, Managing Partner, Mr. Sanjiv Kr. Trivedi, Partner, Ms. Iram Hassan, Principal Associate, Mr. Sanket Sarawgi, Senior Associate and Ms. Mahima Cholera, Senior Associate.

Birla Corporation Limited and other Companies were represented by Mr. Shyam Divani, Senior Advocate and Mr. Ranjan Bachawat, Senior Advocate.

Birlas were represented by Mr. S.N. Mookherjee, Senior Advocate, Mr. S.K. Kapur Senior Advocate and Mr. Ratnanko Banerjee, Senior Advocate.