Lodha appeal against HC order to lean on extent of Priyamvada Birla estate

As per Lodha, the estate is defined the assets prepared by jt administrators and produced in court. That makes the estate a minority shareholder in all four mfg firms within larger promoter group

Harsh Vardhan Lodha and three companies of the M P Birla group-–Universal Cables, Birla Cable and Vindhya Telelinks-–have filed an appeal against the order passed by the Calcutta High Court restraining Lodha from holding any office in group entities.

The appeals were filed before the Division Bench on Monday. The company stocks today slipped on the high court order. Of the five manufacturing companies in the group, four–-Birla Corporation, Vindhya Telelinks, Universal Cables and Birla Cable-–are listed. The fifth, Hindustan Gum and Chemicals, is a joint venture with Solvay Inc of the US.

Birla Corporation slipped 7.18 per cent and closed at Rs 669.35 on the Bombay Stock Exchange (BSE), Universal Cable was down by 6.53 per cent to Rs 135.30, Vindhya Telelinks 4.64 per cent to Rs 811.50 and Birla Cable 3.96 per cent to Rs 52.10.

The companies are challenging the order on grounds that it infringes on shareholder rights. They are likely to argue that orders have been passed on some 22 promoter group entities, including listed companies on exercise of voting right on shares held by them in group companies without giving most any hearing at all.

 

At the heart of the dispute is the “controlling block of shares”. According to the Lodhas, the estate of Priyamvada Birla is defined by the inventory of assets unanimously prepared by joint administrators and produced in court in 2013. By that definition, the estate is a minority shareholder (even after considering its indirect holding through investment companies) in all four manufacturing companies within the larger promoter group.

The Single Bench order mentioned that the APL Committee had the right to exercise all such powers and perform and all such acts that the late Priyamvada Birla would have exercised. 

It held that the committee was within its power to ask all entities which were under the control of Priyamvada Birla to exercise their voting right with regard to their investment in the share capital of any of the companies which were under its control, in the manner considered by the APL as beneficial to the interest of the estate.

Lodhas would argue that the verdict sees Priyamvada Birla as a “single individual promoter”.

The APL Committee is of the view that the estate has a majority share in the M P Birla group of companies including manufacturing and operating companies.