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Following permission from a Calcutta High Court divisional bank to make public decisions made at the annual general meetings (AGM), Harsh V Lodha has been re-elected as director at two of the MP Birla Group companies and will also be entitled to obtain a part of The profits of the group companies.
The Court order, which annulled the August 9 decision of the same court approved by a single bank, prevented the entities of the M P Birla Group from publishing the results of the vote of the last AGM. However, the group companies will now be able to implement the decisions made at the AGM last year.
Sources said Birlas will appeal to higher courts seeking to revoke this order.
While Vindhya Telelinks and Birla Cable group companies can now reappoint Lodha as director of these companies after shareholder approval, dividends can now also be paid to shareholders of Birla Corporation and Vindhya Telelinks. Lodha is president of the flagship company Birla Corporation, as well as director of the other three companies.
Lodha is now entitled to a 0.75 percent share of the net earnings of Birla Corporation and Birla Cable, while Lodha’s earnings related commission may now exceed 50 percent of the total annual compensation payable to all non-executive directors of Vindhya Telelinks. Lodha is the president of the iconic Birla Corporation and director of the other two companies.
The earnings-related compensation is in addition to the session fees and other expense reimbursements payable to Lodha for its participation in the board, committee and other meetings. Regarding this decision, Birla Corporation reasoned that Lodha has contributed substantially to the company’s sustained growth and has played an active role since his appointment as non-executive chairman in October 2009.
The shareholders of these respective companies had approved these special resolutions that have now been made public to the shareholders.
In addition, non-executive directors, including the independent directors of Birla Corporation and Vindhya Telelinks, have also been allowed a commission related to earnings within the overall maximum limit of one percent per year.
The shareholders of Vindhya Telelinks and Birla Cable approved the resolution to reappoint Lodha as director in these respective companies with more than 99 percent of the votes cast in favor, as well as special resolutions that provided a cake to Lodha and other directors in company profits.
Birla Corporation will now pay Rs 69.63 crore as dividends at a rate of Rs 7.50 per share, while Vindhya Telelinks will pay Rs 14.22 crore as a dividend at a rate of Rs 12 per share.
A Birla Corporation source said the court order will be retrospective in nature and that compensation to Lodha can be counted for the entire 2019-20 fiscal year.
Debanjan Mandal, a partner at Fox & Mandal, the law firm representing Lodha in the court battle, said: “This is a vindication of our client’s position that third-party companies are not a party to the probate lawsuit. It is a victory for corporate democracy, as the results of the surveys carried out at the AGM clearly show what 99 percent of the shareholders want. “
Sources among the Birlas said the order of the Calcutta High Court Divisional Bank has ordered the Probate Court to consider and decide all aspects of the matter after giving these companies a chance, which has been one of the Birlas’ prayers.
The Birla family spokesperson said: “This is a landmark measure that will now put companies also before the Probate Court for the first time in this litigation of a decade and a half and, consequently, will put a curtain in hiding and seek the game played by Lodha and the companies of the MP Birla Group in different forums ”.
The court order has given yet another twist to the more than a decade and a half dispute over control of the M P Birla group. It started in 1999 at the alleged will of Priyamvada Birla, bequeathing all of his inheritance to Rajendra Singh Lodha and is in the final stage with ongoing succession proceedings. In 2012, the Calcutta High Court appointed in 2012 a three-member Pendente Lite Administrator of the Priyamvada Birla Estate (APL Committee) to manage the estate of Priyamvada Birla.
Based on the opinion of the APL Committee, Arvind Kumar Newar, nephew of M Birla, and others, had opposed making the results of the vote public at the General Meeting of these companies.
In July 2019, the Court appointed the Priyamvada Birla Estate Administrators Committee had decided to oppose the re-election of Lodha as director at Vindhya Telelinks and Birla Cable and the payment of directors’ salaries linked to the earnings of the four publicly listed companies. Group that included Birla Corporation and Universal Cables in addition to the two companies mentioned.
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