'HC verdict's aim to ensure M.P. Birla Group's smooth functioning'

Updated: Sep 20,2020 16:57 GMT

social social social social 'HC verdict's aim to ensure M.P. Birla Group's smooth functioning'

IANS

Tags: National
New Delhi, Sep 20 (IANS) The sole objective of the judgment of the Calcutta High Court last week is to protect and preserve the estate which includes the controlling block of shares in the M.P. Birla Group, sources said.

According to sources, Harsh Vardhan Lodha is held to be a threat to such protection and preservation.

"Therefore in the interest of the Estate as well as the M.P. Birla Group, the court has passed strictures and injunctive orders against Harsh Vardhan Lodha, including his removal from all positions in the M.P. Birla Group. This will ensure smooth functioning of the estate and the M.P. Birla Group which is the objective of Birlas whereas H.V. Lodha's actions are only for self-aggrandisation," a source said.

After a long battle by Birlas, the Calcutta High Court in 2012 appointed the APL (Administrator Pendente Lite) Committee to administer and manage the estate of Priyamvada Devi Birla. When such appointment was made, it was undisputed that the estate includes the controlling block of shares in the M.P. Birla Group. In fact, Lodha himself also applied for appointment as an administrator but this was rejected by the court.

Sources said that in 2019, obstruction by Lodha reached its peak. He brazenly acted against the interest of the estate as well as the M. P. Birla Group and refused to abide by the directions of the APL Committee.

Against this background, the APL Committee decided to not support his reappointment as a director in M.P. Birla Group of Companies any further. In fact, he continued to interfere with the decisions of the APL Committee and allegedly manipulated the voting at the AGMs to take place as per his wishes and in contravention of the directions of the APL Committee.

The Birlas applied to the High Court for implementation of the decision of the APL Committee. As a counterblast, Lodha made a spate of applications for quashing of the decisions of the APL Committee.

"It is in these applications, the judgment was passed by the hon'ble court. The judgment runs into 159 pages and threadbare deals with and trashes all the objections raised by the Lodhas. It, in great detail, discusses the provisions of the Indian Succession Act and the Companies Act in coming to its conclusions," the source said.

The court held that it is an admitted and undisputed fact that the controlling block of shares in the M.P. Birla Group companies is a valuable asset of the estate.

The APL Committee has stepped into the shoes of Priyamvada Devi Birla, who stood as a single individual promoter. Therefore, as the single directing hand of the promoter's group of shares in all of the companies and other institutions controlled by her, such controlling power by virtue of statutory devolution stood devolved upon the APL Committee and it can exercise all such powers as had been exercised by Priyamvada Devi Birla during her lifetime.

"Further, if conflicts between H.V. Lodha and the estate are not removed or stopped by action of the court, then, the ultimate beneficiaries under the will may be deprived seriously as this growing conflict with the interest of the estate may ultimately lead to dissipation of the estate without any checks and balances," a source said.

The sources added that the APL Committee is well within its power to ask all entities under the M.P. Birla Group which were under the control of Priyamvada Devi Birla to exercise their voting rights in the manner considered by the APL Committee as beneficial to the interest of the estate.

All these entities of the group would have exercised their voting rights in accordance with her direction had she been alive. Accordingly, such entities would exercise voting rights in the manner to be guided by the APL Committee.

Section 247 of the Indian Succession Act demonstrates a larger scope for the court to exercise jurisdiction to protect and preserve the estate of the deceased through such machineries it deems fit and in the present case, through the APL Committee.

Under the said Act, the court can appropriately deal with a situation wherever it relates to protection and preservation of the estate of the deceased. Therefore, the court held that it has jurisdiction to pass an order in favour of protection and preservation of the estate of the deceased. Further, the applications filed by the Birlas are very well maintainable.

The court has held that in the present case, not only are the defendants but even the Administrator Pendente Lite allege and the records of the case since 2012 demonstrate that the judicial members appointed in the APL Committee could not work smoothly and they had to resign due to non cooperation from the end of plaintiffs, in particularly, the plaintiff No.1 - Lodha.

The present judicial member was appointed in 2019 and he was also being obstructed from functioning smoothly. In order to keep the estate in the safe hands of the administrator, some restraint should be imposed, the sources said.

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