Harsh Vardhan Lodha and three cable manufacturing companies of the MP Birla group filed appeals against the trial court order which restrained Lodha from holding any office in any group entity.

Sources say Birla Corporation, the flagship of the group, will also file an appeal on Tuesday and a hearing at the division bench could start from Wednesday. The Lodhas are seeking an interim stay on the operation of the order.

The legal setback to Lodha, who is the chairman of all group companies, appeared to have unsettled the investor community. On the first trading day after the single bench order was passed, all four listed companies came off sharply in an already weak market.

While the broader market shed a little over 2 per cent — Nifty 50 closed 2.21 per cent lower — the Birla Corp stock fell by 8.19 per cent. The cable companies — Universal Cable, Birla Cable and Vindhya Telelinks — also fared worse than the market, correcting 6.29 per cent, 3.76 per cent and 3.68 per cent, respectively.

Arguments

The appeal filed by Lodha and the three firms would revolve around what constitutes the controlling block of shares in the manufacturing companies. According to the submission made on Monday, Lodha would argue that the estate of late Priyamvada Devi Birla, was only a minority shareholder in the companies.

The estate, which is now governed by a committee of administrator pendente lite (APL committee), is one of the many shareholders of the larger promoter group, his counsel would argue before the division bench.

Sources in the Lodha camp pointed out that estate is conclusively defined by the inventory of assets unanimously prepared by joint administrators and produced in court in 2013.

Harsh Lodha — whose father late Rajendra Singh Lodha was handed the reign of MP Birla group in 2004 by a contentious will of late Priyamvada Birla — in his submission is also going to point out that despite the trial court acknowledging its limitation on jurisdiction over companies, it ordered all such promoter group entities to exercise voting rights in line with the direction of the APL committee.

“The verdict seeks to change the composition of independent trust and societies run by trustees and managing committees by removing a member without giving any of them any hearing,” a source in the Lodha camp argued. Such entities hold over 14 per cent in Birla Corp.

The riposte

Birla camp had a different take. It argued that the controlling block of share — 62.9 per cent in Birla Corp — is part of the estate, a view taken by the single bench as well.

The Birlas also contested that the inventory of the estate drawn up in 2013 is not full and final, noting that the Lodhas have made at least four submissions before the court seeking direction to prepare a final list.

“How come Lodha is now in control of the MP Birla group today? It is because he had stepped into the shoes of his father R.S. Lodha, who was the executor of late Priyamvada Birla’s will. Today, the APL Committee is in her shoes,” said a Birla source.