Lodhas are gearing up to file an appeal against the Single Bench order of Calcutta High Court restraining Harsh Vardhan Lodha from holding any office in M P Birla group entities next week and could be as early as Monday. The appeal will be filed before the Division Bench of the Calcutta High Court.
Late on Saturday, listed companies of the M P Birla group informed stock exchanges that a Single Bench order of Calcutta High Court dated September 18, 2020, in a probate proceeding to which the company is not a party has, inter-alia, restrained Shri Harsh V Lodha, non-executive director and chairman of the company from holding any office in them.
The companies said that they were in the process of reviewing the order. There are four manufacturing entities in the M P Birla group that are listed: Birla Corporation, Vindhya Telelinks, Universal Cables and Birla Cable.
The other manufacturing company, Hindustan Gum and Chemicals is a 50:50 joint venture with Solvay Inc of the US.
The order passed on Friday has an impact on around 30 companies, trusts and societies holding shares in various companies of the M P Birla group as they would exercise their voting right in accordance with the directions of the APL Committee (committee of administrators pendente lite of the estate of Priyamvada Birla), appointed by court in 2012, to oversee and administer the estate of Priyamvada Birla.
The order mentioned that the APL Committee had the right to exercise all such powers and perform all such acts as late PDB (Priyamvada Devi Birla) would have exercised had she been alive.
PDB had a controlling shareholding in the investment companies either by direct investment of or along with other investment companies, and PDB and the investment companies together with manufacturing companies, through cross shareholding, had controlling interest in all those manufacturing companies.
The M P Birla group companies, it may be mentioned, have a pyramid structure of control under which Priyamvada Birla directly controlled the apex investment firms and through a mechanism of chain and cross holding of shares, the manufacturing and operating companies – Universal Cables, Vindhya Telelinks, Hindustan Gum & Chemicals, Birla Cable and Birla Corporation – were controlled.
While Lodhas’ stand is that the estate of Priyamvada Birla has only 16.04 per cent shareholding (direct and a small part of indirect) in Birla Corporation, the Birlas and the APL Committee were of the view that it had a controlling interest of 62.09 per cent (which includes both direct and indirect shareholding). Birla Corporation is the flagship of the M P Birla group. The 62.09 per cent reflects promoter shareholding in the company.
According to the Birlas, it was clear from the judgment of the court that the sole objective of the judgment was to protect and preserve the estate which includes the controlling block of shares in the M P Birla group.
“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,” the Birla side said.
The listed companies of the M P Birla group are also expected to raise the matter legally that shareholders had voted in favour of Lodha’s reappointment.
In a statement on Friday, Birla Corporation had said that it would examine the Calcutta High Court judgment and take necessary steps, including filing of appeal, because the verdict had ignored shareholders’ democracy and the right to elect by majority of their votes a person as a director of the company.
In Birla Corporation, Lodha was reappointed with a majority of 98 per cent votes in favour. In other companies where the APL Committee had opposed reappointment – Vindhya Telelinks, Birla Cable (July 2019) and Universal Cables apart from Birla Corporation (July 2020) – Lodha was reappointed with more than 97 per cent votes in favour.
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