A division bench of Calcutta High Court declined to stay an order of the trial court which had restrained Harsh Vardhan Lodha from holding any office of the MP Birla Group entities.

The bench, however, clarified that the restriction on Lodha during the pendency of the suit would be “on the strength of the shares referable to the estate of PDB (Priyamvada Devi Birla).”

A court appointed committee of administrator pendente lite is in charge of the estate which was bequeathed to late Rajendra Singh Lodha, father of Harsh, by a purported will of late Priyamvada in 2004, leading to a string of legal cases between the Lodhas and the Birla family.

Taking a cue from the observation, the Lodha camp was quick to claim that the division bench provided “significant relief” to Harsh Lodha to continue to hold offices of the MP Birla Group entities, which include four listed manufacturing companies.

The Birlas were equally prompt to dismiss any suggestion that the division bench offered a leeway to Lodha, arguing that Thursday’s order in fact had enlarged the scope of the trial court judgment by asking Lodha to “abide by” the directions of the single judge.

Lodha view

Harsh Lodha is a director and chairman of three cable companies and the flagship cement maker Birla Corporation. He has not demitted office even after the trial court on September 18 restrained him from holding office.

Debanjan Mandal, partner of Fox & Mandal, argued that multiple orders of the high court held that the estate is the owner of the shares of companies as mentioned in the schedule of assets filed by the APL Committee. According to that, the estate is only a minority shareholder in all manufacturing listed companies of the MP Birla group.

“Our client wasn’t, in the first place, reappointed as a director in these companies on the strength of the estate of Priyamvada Devi Birla,” Mandal said. “So the order paves the way for his continuing to hold offices in these companies as he was doing uninterruptedly from before the death of Priyamvada Birla”.

The Lodha camp also argued that the division bench, comprising chief justice T.B. Radhakrishnan and justice Shampa Sarkar, also paved the way for Lodha to continue to be in the trust and societies of the group.

Apart from holding over 14 per cent share in BCL, they control several public institutions such as Belle Vue Clinic, Bombay Hospital and South Point School.

“There is no concept of shareholding in trust and societies, and, therefore, there is no question of Lodha being restrained from holding any office in the trusts and societies. He holds office in these entities not on account of any shareholding of the estate of PDB but by appointment by the trustees/managing committees,” Mandal said.

The Birla view

N.G. Khaitan, senior partner of Khaitan & Co and counsel for the Birlas, threatened to file a contempt of court against all those who would allow Lodha to continue in office. “If he (Lodha) ever chairs a meeting of BCL or any other companies of MPB, all the board members will be committing a contempt of court,” he said.

According to him, the division bench concurred that PDB’s estate has “controlling interest” in all companies and trust and societies of the MP Birla Group. He referred to the following observations of Thursday’s order: “Obviously, therefore, the controlling interest is definitely referable to the shareholdings. In the case in hand, it truly is part of the estate of PDB.”

“This clearly shows that controlling interest is truly a part of the estate of PDB, which is now under the management of the APL Committee. This means that the entire promoter block of the listed companies are part of the estate,” Khaitan said.

Since the APL committee had called for Lodha to be ousted from the board of all companies, he could not continue any more “on the strength of the shares referable to the estate of PDB”.

Khaitan said Lodha had in the past admitted in various courts that the estate is in control but changed tack two years back when APLC started taking decisions against him.