The Calcutta High Court on Friday issued a verdict asking for the removal of Harsh Vardhan Lodha from the boards of all MP Birla Group companies, a first in 16 years of legal battle over the estate of the late Priyamvada Devi Birla.
While the judgment comes as a major shot in the arm for the Birlas who are engaged in an acrimonious court battle against the Lodhas over the estate, the Lodhas maintain that the verdict “seems to have ignored shareholders’ democracy and their right to elect a director of a company”.
The Lodhas said they will challenge Friday's verdict in an appeals court next week.
Priyamvada Birla, who died in 2004, bequeathed her estate to the late Rajendra Singh Lodha, a chartered accountant who was an advisor to her for many years. Harsh Lodha is RS Lodha's son, who currently heads the MP Birla Group.
RS Lodha, who succeeded Priyamvada Birla as chairman of the MP Birla Group, died in 2008.
The extended Birla family opposed the will, and since 2004, have been fighting court cases against the Lodhas. Though in 2008, the Supreme Court ruled that most members of the Birla clan did not have legitimate interest in Priyamvada Birla's estate, they continue to fight Harsh Lodha in courts through relations.
Friday's verdict comes amid the dispute over Harsh Lodha's reappointment to the boards of three companies: Vindhya Telelinks and Birla Cable last year and Birla Corporation this year.
A court-appointed committee of joint administrators had resolved by 2:1 majority to seek Harsh Lodha's removal from the boards of these three companies. But in the polls taken at the AGMs, Harsh Lodha was reappointed as director of all three companies with at least 98% votes polled in his favour.
Friday's verdict ordering the removal of Harsh Lodha from all MP Birla Group companies was described by the Birlas as "monumental". They also pointed out that he was restrained by the same judgement from taking any remuneration from the group in his capacity as an independent director.
"His stranglehold over the MP Birla Group has been brought to an end," said a statement issued by the Birlas.
"The verdict by Justice Sahidullah Munshi over reappointment of Harsh Vardhan Lodha as a director of Vindhya Telelinks Ltd and Birla Cable Ltd does not appear to be lawful. Our clients' confidence in the system remains completely unshaken and our clients will challenge the judgement for immediate and long-term relief," said Debanjan Mandal, partner, Fox & Mandal and lawyers for Harsh Lodha.
It has been observed in the verdict that the court does not have jurisdiction over the MP Birla Group, yet orders were issued asking for removal of a director for its companies, he added.