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War over a will

Pradeep Gooptu & Kausik Datta | July 17, 2004

It's a family superstition that puzzles visitors to Birla House in Kolkata. Step into the lift and there seems to be a floor missing. But it's not the 13th floor that has been given the miss as in most other high-rise buildings around the world. It's the 12th floor that isn't there.

Why? According to business folklore, the Birla family believes that twelve is an inauspicious day for the clan. But that leaves open the question: why was the will of Priyamvada Birla, widow of Madhav Prasad Birla, opened on July 12?

The Birlas certainly weren't keen on opening the will on July 12. They suggested that the will should be opened after the mandatory mourning period ending on July 15.

But Rajendra S Lodha, leading chartered accountant and a former president of Ficci, who was the custodian of the will, insisted that it should be read in everyone's presence on July 12. He's said to have been advised by an astrologer about the auspicious dates.

The result was a scenario that might have been borrowed from any one of a  score of detective novels. Holding all the cards was Lodha who has been Priyamvada's right-hand aide over the last decade. Gathered around were the top members of the Birla clan led by 87-year-old patriarch Basant Kumar Birla.

Without too much ceremony Lodha read out the contents of the will to the shock and horror of everyone gathered around. The main beneficiary as the world now knows, was Lodha who's also the co-chairman of the M P Birla Group companies, which is reckoned to have assets worth Rs 5,000 crore (Rs 50 billion).

If anything happens to Lodha, control of the group will vest with his younger son Harsh Vardhan, who is a director on M P Birla flagship company Birla Corporation.

But the ripples from that will opening are still echoing through the world of Indian business and particularly the powerful Kolkata Marwari community. The next rounds of the battle will be fought out in court when Lodha applies  to have the will probated.

Says Basant Kumar, the chairman of the B K Birla group and son of G D Birla: "There is perfect harmony in the family. Unitedly, we will move to court. The family members have examined the will and the consensus is that we have the moral and legal right to challenge the validity of the will. We are confident that we will win the case."

That apart the Birlas have also moved to gain the moral high ground and make it clear that they aren't fighting over money. On Thursday, three days after the will was opened Kumar Mangalam, chairman of Aditya Birla group and grandson of Basant Kumar issued a statement on behalf of the group saying, "We want the properties to be vested with the trust. The late Madhav Prasad desired to give away his properties to charitable trusts."

The Birlas say they've been caught completely unawares by the contents of the will. The family elders like Basant Kumar (BK) and Krishna Kumar (KK) say they had been holding talks with Priyamvada about the will but she had never indicated it would go out of the family.

In fact, the family expected that the bulk of the empire would be left to Yasho Vardhan Birla the son of Ashok Birla who died in an air crash several years ago. Ashok was Madhav Prasad's nephew and closest relative. They also thought there might be smaller settlements for other members of the family.

But Priyamvada had her own mind and she had occasionally expressed murmurs of disquiet about what would happen once she died. In December 2001, she told Business Standard: "We are concerned with it (that there is no one to look after the group after she retires) and working to solve it out."

She indicated she would like to continue as long as possible because, "there was no one to look after the group." While she didn't spell it out, there was a hint that her relationship with the Birla family wasn't perfect.

She had also made it clear in other ways that the flamboyant Yasho wouldn't be her chosen successor. It's a practice in the Birla Group to have successors on the Birla board companies and he wasn't on any of the M P Group boards.

Also, it's said that soon after Madhav Prasad died she had wanted him to be more closely involved in the M P Birla group companies. But his management style apparently rubbed many of the older executives the wrong way. Says one former executive: "He would not listen to us. Had he been there in the group, we (executives) would have to leave the group."

Certainly, the will has become the talk of the town -- and the country. The M P Birla group controls the famous South Point School which has more than 4,000 students and that's enough to ensure public interest. It has also turned the reclusive Priyamvada into a public figure after her death.

What had Priyamvada wanted? One senior lawyer says she was hoping to create a structure like the Ford Foundation that would execute charitable works with money from the business. But this implied that if the assets were divided after her death, this structure or focus could get lost.

Lodha's defence is that he must be seen as the executor of the document and that a foundation would not be successful if the assets were divided. Others argue that the M P Birla trusts which existed during her lifetime showed her prupose and her personality.

"She was firm yet gentle, and extremely strong-willed when it came to preserving the memory of her husband through charitable works like hospitals and schools -- they were more important than specific business issues," said an executive who retired a few years ago but who is still involved in the group's trading activities.

Even as she grew older she was actively running many of the group's key activities and businesses. Just three months ago, she had hosted the West Bengal governor at a special M P Birla group function at Science City and seemed perfectly healthy.

"She had a check-up done in London a couple of months ago and the findings were fine", confirmed a very senior Marwari industralist in Kolkata. At the workplace and at the charities (see table), she and co-chairman Lodha decided on the course of action.

Lodha had been inducted into the group five years ago and was appointed group co-chairman in 1999-2000. Insiders say that his entry into the companies came after she decided to maintain a distance with other family members after an initial closeness after Madhav Prasasd's death in 1990.

The influence of Lodha on Priyamvada, a reclusive lady, was beyond doubt. The Lodhas and Priyamvada went abroad several times and also went on several pilgrimages together. Harsh Lodha called her "badi maa."

As co-chairman, Lodha played a very active role in her group companies, chairing annual general meetings and acting more often than not as the public face for the low-profile group, assisted by Birla Corporation Managing Director K C Mittal.

To be fair, Lodha's reputation as an auditor and service industry leader had resulted in his elevation to the chairmanship of Ficci some years ago. In the M P Birla group, he was an industrialist, not a manager.

That he was involved as auditor in several Birla companies outside the M P Birla group strengthened his credentials. His Lodha & Co is one of the country's largest chartered accountancy firms.

He had a basket of Birla and non-Birla clients and enjoyed a high level of credibility especially amongst Kolkata's Marwaris. When he was elected Ficci president last year, he received backing from many non-Birla business houses as well.

Nevertheless, the coming battle will see some interesting complications -- especially since the Kolkata Marwari community is quite a small one. For instance, Khaitan & Co who were legal advisors to Priyamvada and who were perhaps involved in all M P Birla Group documentation will most probably spearhead the Birla attack.

Should the property have gone to an outsider? The Birlas feel that it should have gone to a family member. But lawyers say that the Birlas come under the Mitakshara school of Hindu law under which Priyamvada could dispose of property held solely by her in any way she deemed fit. In other words, some lawyers say, she could settle the assets on anybody she chose.

Some lawyers argue that her hands would have been tied if she had held the properties jointly. Alternatively, if she had died intestate, the property would have devolved to relatives as laid out under the Hindu Succession Act.

Any will can only be challenged on two grounds: that the person executing it was not of sound mind. Alternatively, that the person was forced to write the will because of an extenuating circumstance. At a different level it must be proved that the will is forged.

Both would mean a long court battle. In the meantime, the Birla action may result in appointment of a receiver on the estate to keep Lodha out. To fend this off, Lodha could offer some safeguards to protect the interests of the claimants and secure the continuation of status quo in operational matters.

Also, there are rumours travelling around the city that Priyamvada left other documentary evidence to back the fact that she wanted the property to go to Lodha.

What's certain is that it will be a long battle in the courts. And the low-profile M P Birla Group will, before the battle is over, be a household name.

Contours of the empire

What's at stake in this giant battle? The M P Birla Group is reckoned to be worth around Rs 5,000 crore (Rs 50 billion) but it certainly isn't the fastest growing industrial house in the country. It makes a lot of cement which is profitable and it exports auto trims. It also has a grabbag of other businesses like jute which aren't great moneyspinners.

Priyamvada and Lodha definitely haven't turned the group's fortunes around during the last decade. The group's top companies include Birla Corporation, Universal Cables, Vindya Telelinks, Birla Ericsson Optical, Punjab Produce and Trading Co, Gwalior Webbing Ltd, Mazbat Tea Estate Ltd, Hindustan Gum & Chemicals.

But there is lots of land and the group has made unusual moves in recent years like buying South Point School. It also runs several trusts like the Shreyas Medical Society, Bombay Hospital Trust. In addition, it also runs the Birla Institute of Astronomy & Planetarium Sciences.

If that isn't enough there's also the complex nature of the Birla empire. Once upon a time all the group companies were linked by an impenetrable web of cross-holdings.

Even now those cross-holdings are still in existence. Most worryingly, for the Birlas, Lodha could now get a foothold in Pilani Investments, the key Birla Group holding company.

Although the cross-holdings of various Birlas was cleared to a great extent after the death of G D Birla, Pilani Investments still has shareholdings in many companies.

The M P Birla Group has a 25 per cent stake in Pilani. Other family members Krishna Kant, Basant Kumar, Ganga Prasad and Sudarshan Kumar hold the remaining shares.

Pilani holds shares in almost every important Birla company including Century Textiles, Kesoram Industries, Mangalam Cement, Mysore Cements, Grasim Industries, Hindalco, Indian Rayon, Jay Shree Tea, Mangalore Refinery, Orient Paper, Saurashtra Chemicals, Zuari Industries, Birla VXL and Bihar Caustic & Chemicals. Since these companies hold shares in other Birla companies, Pilani has indirect holding in virtually all the companies managed by the Birla clans.

Legal luminaries

When two powerful opponents square off for a courtroom battle one thing is always certain: there will be a galaxy of legal brains on both sides of the fence. The battle that's unfolding between the Birlas and Rajendra Lodha is obviously no exception.

The Birla solicitors will be Khaitan and Co, which has already lodged a caveat in the court. On the other side, there'll be Fox and Mondal as the solicitors for R S Lodha.

Legal sources say Khaitan and Co has already selected Team Birla for the forthcoming legal battle. It will probably be headed by former West Bengal chief minister and Punjab Governor Sidhartha Sankar Ray.

Ray's team mates will be former NDA government Central minister S B Mookherjee, former Clarion chairman Sudipta Sarkar and S N Mookherjee,the son of S B Mukherjee, All are eminent lawyers specialising in corporate law.

Fox and Mondal's team will probably be led by Samarditya Pal. Then, there will be Shaktinath Mukherjee, a leading civil lawyer, along with the high profile Anindya Mitra, Sudish Chandra Dasgupta and Shyama Prasanna Roychoudury, all senior civil advocates.

There will probably be one specialist -- Dipak Basu, a lawyer reputed to be a specialist on probating wills. The team is also likely to induct one more heavyweight, Pratap Chatterjee, son of Parliament speaker Somnath Chatterjee.

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