Oberoi, Kalyani Feuds Highlight Investors' Concern with Indian Family Businesses

The governance norms in Indian family businesses are once again in the spotlight after reports of intense battle for inheritance in Oberoi and Kalyani families emerged.

The dispute over wills comes at a time when Indian family businesses are looking for ways to future proof their successors from any major dispute.

For the unversed, hospitality doyen Prithvi Raj Singh Oberoi passed away in November last year. The family is said to be in the middle of a bitter dispute over assets left behind by him.

The dispute in the Kalyani family began when Baba Kalyani refused to give up shares of family's pharma business Hikal to his sister Sugandha Hiremath.

New Developments in Oberoi, Kalyani Families

The Economic Times reported that late PRS Oberoi's family is locked in a dispute between Anastasia Oberoi and her step-brother Vikramjit Oberoi, step-sister Natasha Oberoi and cousin Arjun Oberoi. The Delhi High Court passed an interim order on Thursday that blocked the transfer of shares held by PRS Oberoi in EIH Ltd, Oberoi Hotels and Oberoi Properties.

At the centre of the dispute is a will and a codicil dated October 25, 2021 and August 27, 2022, which was presented by Anastasia in the court. She alleged that the family is not allowing the execution of the will which would give her a rightful share of the assets left behind by PRS Oberoi.

Also Read | How Indian Family Businesses Can Protect their Wealth

The report stated that Vikramjit refused to accept the will, stating that it doesn't reflect the wishes of his grandfather Mohan Singh Oberoi who founded the group. Moreover, the Vikramjit side alleged that the will presented in the court by Anastasia was unregistered.

Vikramjit had presented another will dated March 20, 1992, which was drawn up by PRS Oberoi. As per the will, his father held shares in Oberoi Hotels and Oberoi Properties in trust for Vikramjit and Arjun which were supposed to be devolved upon the demise of PRS Oberoi.

A similar dispute over wills is playing out in the Kalyani family. Mint reported that the conflict between Bharat Forge co-founder Baba Kalyani and his siblings may take a fresh turn as an affidavit filed in court two years back has surfaced.

Also Read | Bharat Ram Family's Guide to Avoid Family Disputes

The affidavit reportedly contains a will drafted by Kalyani's mother, Sulochana Kalyani, which gifted a large share of assets to her younger son Gaurishankar Kalyani. As per the affidavit, Baba Kalyani took away a large share of assets from his ageing father Neelkanth Kalyani in the 1990s and instigated his mother to file cases against Gaurishankar.

The family decided to gift certain assets of family trusts to Gaurishankar and his family. The affidavit accessed by Mint says, “Only Gaurishankar had not received any of the family or HUF (Hindu Undivided Family) assets till then. So, to safeguard Gaurishankar and his family, my husband (Neelkanth Kalyani) wished to give his remaining assets to Gaurishankar."

Why Family Disputes Concern Investors

The latest developments in some prominent family businesses add to the concerns of investors who track India's corporate sector. Speaking to Outlook Business for its August cover story, Mehul Bheda, partner at Dhruva Advisors, a consultancy, said that family disputes in the past have acted as a drag on India Inc.’s growth. “Operations are impacted because time and energy are spent on these feuds. Long-running disputes have a negative bearing on the business,” he said.

The Ambanis, Birlas, Bajajs, Hindujas, and Modis are some of the big names that have witnessed disputes over family wealth in the last two decades. Various studies have shown how family businesses struggle to survive as newer generations take the helm. A CII note said that only 13 per cent of family businesses survive till the third generation and only 4 per cent go beyond the third generation.

Several families are adopting detailed documentation to avoid instances of big disputes amongst successors in the future. Family constitutions, settlement agreements, and trusts are emerging as solutions that can help mitigate the risk for investors who want to be part of India Inc.'s growth journey.

Ruby Ahuja, senior partner at Karanjawala & Company Advocates, a legal firm, said that families have had to bear the cost of long-drawn legal battles in courts under the full glare of the public. “The legal costs are too high as it takes a long time to resolve litigation in Indian courts. The clear answer for family businesses today is to put everything on paper for future generations,” she said on how families can protect their riches.

The Oberoi and Kalyani family feuds could add another long chapter to the succession and inheritance battles seen in the past.

(To get detailed insights on family disputes, read Outlook Business' August Cover Story here, which delves into the root cause of such issues)