The Calcutta High Court, on Thursday, dismissed the contempt petitions filed against Harsh Vardhan Lodha for continuing as director of MP Birla Group companies.

According to Debanjan Mandal, partner, Fox & Mandal and the advocate for Lodhas, the verdict would clear the decks for Lodha to continue as the chairman of all companies of the MP Birla Group including Birla Corporation, Universal Cables, Vindhya Telelinks and Birla Cable.

“Our client is deeply grateful to the highest honorable court of the state for this resounding victory. In the past two years, relentless attacks have been mounted, not only on Lodha, but also on the independent directors and executives of the MP Birla Group companies. Thursday’s verdict vindicates the highest level of governance standards maintained in these companies from the times of the late Madhav Prasad Birla,” Mandal said in a statement issued by the company on Thursday.

Ongoing dispute

The order was passed by the Division Bench of Calcutta High Court comprising of Chief Justice Thottathil B Radhakrishnan and Justice Shampa SarkarThe latest round of disputes started in April 2019 following a change in the committee of administrators appointed over the estate of Priyamvada Devi Birla.

Since then, two of the three administrators have constantly sought to expand the control of the Committee, not only over the estate but also over third-party trusts, societies and publicly-held companies which are part of the MP Birla Group.

Citing a contentious judgement passed on September 18, 2020 by a single judge of the Calcutta High Court, the administrators went to the extent of issuing intimidating letters to independent directors of listed companies, threatening them with punishment for contempt of court orders if they allowed Harsh Lodha to continue as the chairman, even after the said judgement was challenged and modified by the same Division Bench which passed Thursday’s verdict, the statement issued by the Lodhas said.

At the annual general meetings of the four manufacturing companies held in 2019 and 2020, Lodha was reappointed director by a majority of at least 97.98 per cent of votes cast in his favour.

However, the Single Judge comprising of Justice Sahidullah Munshi (now retired)had, in an order on September 18, 2020 restrained Lodha from holding any office in the MP Birla Group which was later challenged, not only by Lodha but also by the four companies of the group before the Division Bench of the Calcutta High Court. On October 1, 2020, the Division Bench relaxed the restriction imposed on Lodha’s holding offices by saying that he should not hold any office on “the strength of shares referable to the estate of PDB”.

The order of October 1 paved the way for Lodha to continue to hold offices in these companies since in all of them, he was reappointed on the strength of shares of third-party promoter group entities, financial institutions and individual shareholders.

Lodha continued to act as director of these companies and has chaired all board meetings of these companies on the strength of the interim order. This led to the latest round of attacks in the form of four contempt cases filed by the Birlas not only against him but also against independent directors. The contempt petitions were heard in March-April 2021 by the Division Bench.

“Thursday’s judgment, as read out in Court, held that the Court had found no acts of contempt by Lodha and hence the case against him was dismissed. In these circumstances, there was no case against the Directors having aided and abetted him and the cases against them were also dismissed. The Birlas had argued that in spite of the modification of the order of the Single Judge by the Division Bench, Mr Lodha could not have continued as director and was hence guilty of contempt, as were the directors of these companies for aiding and abetting him. This claim was found to be completely untenable,” the statement said.

A spokesperson for Birlas, however said, they are awaiting the copy of the order passed and would decide the future course of action after studying the same.

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