Harsh Lodha wins Supreme Court battle, can head four Birla companies

Top court directed Calcutta HC to dispose of all outstanding appeals and cross-appeals over Lodha holding office as a director in MP Birla Group companies by next March

The Supreme Court on Monday declined to entertain a special leave petition (SLP) filed by the Birlas against a Calcutta High Court Division Bench order that had dismissed contempt petitions against Harsh Vardhan Lodha for continuing as director and chairman in Birla Corporation, Universal Cables, Vindhya Telelinks and Birla Cable.

The apex court directed Calcutta High Court to dispose of all outstanding appeals and cross-appeals over Lodha holding office as a director in MP Birla Group companies by March 31, 2022.

Commenting on the order, Lodha’s advocate, Debanjan Mandal, partner, Fox & Mandal, said, “Monday’s Supreme Court verdict demolishes the charges of contempt of court brought against Mr. Lodha for not stepping down as the chairman.”

“The verdict vindicates our faith in the judiciary as we continue to neutralize repeated attempts to disrupt the functioning of MP Birla Group companies,” he added.

The Birla side said, “In the SLP (special leave petition) filed by Birlas against the order dated April 22, 2021 of the Hon’ble High Court at Calcutta, the Hon’ble Supreme Court observed that it is not inclined to entertain this SLP at this stage as the related issues are pending in the appeals before the high court. Accordingly, the Hon’ble Supreme Court has directed the high court to dispose of the pending appeals by March 31, 2022.”

“It is a win-win situation for both parties as Birlas would derive the benefit by early conclusive disposal of the pending appeals and Lodha would derive the benefit of continuing to be in the control of the manufacturing companies till disposal of the said appeals,” the statement from the Birla side further read.

The contempt petition arose from a Calcutta High Court order of September 18, 2020. A single-bench of the court ordered that Lodha be restrained from holding office in any of the MP Birla group entities during the pendency of the suit involving the contested will of late Priyamvada Birla.

The order was challenged by the Lodhas before the Division Bench, which declined an ad interim stay on the single-bench order and said the restriction on Lodha was “on the strength of shares referable to the estate of Priyamvada Birla”.

According to the Lodhas, it paved the way for Lodha to continue to hold offices in all the companies because he was reappointed on the strength of shares of third-party promoter group entities, financial institutions, and individual shareholders.

He continued to act as director of the companies and chaired board meetings of Birla Corporation and the listed cable companies – Universal Cables, Vindhya Telelinks and Birla Cable – which led to the contempt application from the Birla side.

The Division Bench of the high court did not wade into the into interpretation of the “estate of PDB (Priyamvada Devi Birla)” by either side, and had said, that the question has to be decided in the pending appeals.

But for the purpose of the proceeding, it had said that HVL’s (Harsh Vardhan Lodha’s) participation in the board meetings cannot be termed as contumacious violation of the order of this court as the willful disobedience has not been proved beyond reasonable doubt and there is a possibility that HVL could continue to hold office on the strength of the votes of public shareholders, in

exclusion to the votes of the APL Committee, and the promoter and promoter groups and PACs.

In the Supreme Court, senior advocate, Darius Khambata, argued that Lodha remained chairman of all MP Birla Group companies and chaired all board meetings even in the face of contempt petitions filed against him and the companies he led because he was reappointed in all with a vast majority of at least 97.98 per cent of votes cast in his favour.

The Birlas’s main contention was that Division Bench observations that Lodha could possibly have been elected on the strength of public shareholding is an impossibility because the estate holds majority shares.

TIMELINE

2020:

September 18: Single Bench of Calcutta High Court restrains Harsh Lodha from holding office in M P Birla group entities

October 1: Division Bench declines ad interim stay and clarifies on order

November 5: Harsh Lodha chairs Birla Corporation board meeting

2021:

April 22: Contempt applications dismissed by Division Bench of Calcutta High Court

July 12: Supreme Court declines to entertain SLP filed by Birlas