Lodha challenges validity of Birla trusts

The validity of the trusts set up by late MP Birla and his wife Priyamvada Birla was challenged by R S Lodha in the Supreme Court today.

The beneficiaries of the private trusts were the Birlas themselves and there was no charitable element in them, senior counsel Harish Salve argued. Such trusts without any outside beneficiary were not recognised by the Indian Trust Act.

According to him, if the settler, the trustee and the beneficiary of the trusts were one and the same person, the trusts would not be valid from the beginning, though nominations might have been made later.

The trustees were paying tax on the so-called charitable units as if they were their private assets, and the trusts were created as part of tax planning, counsel said.

The private trusts were also revocable and such trustees could do anything with the deeds in their lifetimes. Therefore, Priyamvada Birla could have changed the nominees and revoked the trusts as she liked during her lifetime.

Therefore there was no "conversion" or breach of trust as alleged in the criminal complaint moved in a Kolkotta court, Salve argued.

The Calcutta high court has allowed the criminal proceedings to go on against Lodha, Delhi lawyer Gauri Shankar, Shivanath Prasad and Sushil Kumar Daga for breach of trust, misappropriation of funds and other offences under the Indian Penal Code.

The criminal compalint was filed by Rajendra Prasad Punsari of the MP Birla group. The high court has maintained that criminal cases should go on while the civil disputes over probating the will could be tried in a civil court.

Salve submitted that the prosecution was an abuse of process and the complaint should have been rejected at the threshold itself by the criminal court. The allegations include breach of trust and misappropriation of huge funds vested in five trusts meant for charitable purposes.

The high court had dismissed the application of the Lodha group to quash the criminal charges. It allowed the proceedings to go on stating that the subordinate courts were the right forums to determine the criminal charges and civil disputes over probating the controversial will of Priyamvada Birla.