Mint Explainer: What sparks family feuds in Indian corporations?

Though family-run businesses are ubiquitous in India, a staggering 97% lack formal family constitutions or succession planning, according to a 2018 report by BAF Consultants. PwC’s Family Business Survey 2023 found that only 60% of Indian family business leaders have implemented formal governance structures.

Mint spoke with experts to examine the causes of these disputes and explored how improved succession planning and governance frameworks could help avoid legal battles and maintain business stability.

What triggers family feuds?

Family feuds in large corporations are typically triggered by several interrelated factors. One major cause is ambiguous or absent succession planning. Ruby Singh Ahuja, senior partner at Karanjawala & Co, said, “The war of succession often lands in court when the new generation is ready to take over. The death of a patriarch can lead to intense disputes among heirs." This is evident in the Oberoi and Chhabria cases.

Also read: Kalyani family feud could take a fresh turn as a crucial will surfaces

Financial disagreements also play a major role. Differences in vision and management style can create rifts among family members. Shaishavi Kadakia, partner at Cyril Amarchand Mangaldas, said, “Conflicts can also occur if some members want to sell the business while others wish to retain it." Performance discrepancies across different business segments can further exacerbate these issues.

Control issues are another significant factor. A desire to control the business, coupled with unclear succession plans, often drives family members toward litigation. The KK Modi family dispute is an example of this.

Personal relationships within the family, including issues of trust and communication, can also exacerbate business conflicts. Nilanjan Paul, a chartered accountant and consultant, said, “Conflicts in family businesses are often driven by unmet personal needs rather than poor performance. They typically arise from unclear situations and miscommunication among the family, owners and management." These issues can be further complicated by personal grudges or differences in lifestyle, which make resolution more difficult.

What’s the legal framework governing family disputes?

In India, family disputes involving business assets are governed by a combination of statutory laws and judicial precedents. Succession laws vary based on religion, with the Hindu Succession Act, 1956; Parsi Succession Act, 1856; and Indian Succession Act, 1925 providing guidelines for inheritance and the division of assets. These laws play a crucial role in addressing disputes over business assets.

The Companies Act, 2013 governs corporate operations, including the relationship between directors and shareholders. It provides a legal framework to resolve corporate disputes, ensuring that corporate governance is maintained even amid family conflicts.

Sebi’s listing regulations also include measures to enhance transparency and succession planning in listed companies. Although initially aimed at enforcing a separation between the chairman and CEO, this requirement was later made voluntary owing to widespread resistance.

However, Sebi now mandates a succession planning policy to ensure smooth transitions in leadership and protect investors from disruptions. It also requires the disclosure of any family settlement agreements that could affect management control of listed entities, thus promoting greater transparency.

How are family disputes resolved in India?

Indian courts generally favour a pragmatic approach to resolving family disputes, often encouraging mediation or arbitration over prolonged litigation. Courts and mediators typically facilitate private settlements to resolve conflicts amicably, aiming to preserve family relationships and minimise disruptions to business operations, said Akshat Pande, managing partner at Alpha Partners.

A landmark case that illustrates this approach is Cyrus Investments vs Tata Sons. The Supreme Court upheld the removal of Cyrus Mistry as chairman of Tata Sons, ruling that his removal did not constitute oppression of minority shareholders and was in the best interests of the company.

Also read: Godrej family settlement agreement: Lessons to learn to prevent disputes and save tax

Mukesh Ambani and Anil Ambani, sons of Reliance patriarch Dhirubhai Ambani, divided the $20 billion industry among themselves in 2005. A more recent example of an out-of-court settlement is that of the Murugappa family, promoters of Chennai’s Murugappa Group, who closed their dispute through an agreement among members in November 2023, ending a fight that arose after the death of MV Murugappan. And earlier this year the Godrej family, owners of the 127-year-old Godrej Group, settled a dispute amicably and split its operations into two portions after five years of negotiations.

How can such feuds be prevented?

Experts recommend several strategies to prevent and manage family disputes. For starters, robust succession planning is essential. Creating a comprehensive succession plan, including drafting will and trust structures, helps prevent conflicts over control and inheritance. “Families should undertake robust estate and succession planning," advised Ruby Singh Ahuja of Karanjawala & Co.“This involves making a will, appointing nominees for assets, and possibly creating a trust structure."

Effective governance structures are also crucial. Establishing clear governance frameworks, such as family charters or constitutions, helps define roles, principles and processes. These documents should address family employment policies, business entry and exit provisions, and conflict resolution mechanisms. Shaishavi Kadakia of Cyril Amarchand Mangaldas said, “A governance exercise should outline the values, principles and processes guiding the management of a family’s shared assets and businesses."

Also read: We mustn't forget that family business disputes have no winners

Separating management from ownership is another recommended strategy. By distinguishing between family-led boards and business management, companies can ensure more professional oversight and reduce the risk of internal disputes. “Separating management from family-led boards helps achieve longevity and minimises the risk of disputes," said Akshat Pande.

For effective leadership succession, patriarchs must create opportunities for the next generation or consider external successors, experts said. This involves years of careful decision-making and mentorship. The participation of younger family members, especially Gen Z, is essential for successful succession planning. The importance of including daughters in succession planning – as seen in companies such as Godrej and Abbott – is also increasing.

How do family disputes affect the business?

Ketan Dalal, managing director at Katalyst Advisors, wrote in an op-ed for Mint in December 2023 that disputes in family-run businesses can have profound effects such as weakening relationships, damaging reputations and disrupting management. These conflicts can cause financial instability and erode stakeholder trust, ultimately diverting focus from strategic goals.

Ketan Dalal said, “Family disputes are not just internal matters – they ripple through the entire business ecosystem, affecting every stakeholder involved." Addressing these conflicts swiftly and effectively is crucial for maintaining business stability and ensuring long-term success.

“Past incidents have shown that investors suffer in a prolonged family feud, resulting in the share price languishing and shareholder value eroding. Sadly, these disputes can also destroy the reputation of a business as it disintegrates into smaller, less effective units. Several family disputes have ended up in courts, which impose strict rules on the management of the assets under dispute. In many cases, the assets are frozen until the dispute is resolved, which severely curtails exit opportunities for shareholders," said Nilanjan Paul, a consultant.

Status of major family disputes in courts

Kalyani family dispute: This dispute centres on the inheritance of assets from the late Sulochana Kalyani, which include multibillion-dollar holdings in companies such as Bharat Forge, Kalyani Steel and Automotive Axles. Tensions escalated when Baba Kalyani refused to transfer shares in Hikal to his sister Sugandha Hiremath.

In February, the executor of Sulochana's will filed for probate of a 2012 will favouring Baba Kalyani. However, Gaurishankar Kalyani, his brother, contested this will in July, alleging it was obtained through coercion and manipulation. He also highlighted a later will from December 2022 that purportedly bequeathed assets to him.

In August, Viraj Kalyani, Gaurishankar's son, sought probate for the December will. A court hearing is scheduled for 23 September to discuss the validity of the two wills. Probate of a will is a legal process that involves validating it, appointing an executor, and distributing the assets.

Oberoi family dispute: This battle revolves around the inheritance of the renowned Oberoi hotel empire. It centres on conflicting wills of the late Prithvi Raj Singh (PRS) Oberoi, who passed away in November 2023. He left behind two wills – dated 20 March 1992 and 25 October 2021 – supplemented by a codicil from 27 August 2022. A codicil is a legal document that adds to, changes, or revokes parts of a will so that a new one isn’t needed.

Also read: Amid family feud, EIH-owned Oberoi Hotels to develop two hotels in Pune, London

Anastasia Oberoi, PRS Oberoi’s daughter from his second marriage, is contesting the validity of the older will, arguing that the most recent will and codicil should dictate the distribution of assets. Her step-siblings Vikramjit Oberoi and Natasha Oberoi, along with cousin Arjun Oberoi, dispute her claims, arguing that the older will should prevail. Vikramjit Oberoi, managing director and CEO of EIH Ltd (the flagship company of the Oberoi Group), asserts that the shares in Oberoi Hotels were held in trust for him and Arjun Oberoi and should be transferred to them.

The Delhi High Court issued an interim order in favour of Anastasia Oberoi on 12 September, preventing the transfer of any shares in EIH Ltd, Oberoi Hotels and Oberoi Properties until the dispute was resolved. The court also protected the rights of Anastasia and her mother to their family home in Kapashera, Delhi. This interim order aimed to maintain the status quo while the court reviewed the evidence and arguments from both sides.

KK Modi family dispute: A dispute erupted in the Modi family following the death of patriarch KK Modi, with his widow Bina Modi and their sons Lalit and Samir clashing over the division of Modi Enterprises. The conglomerate spans sectors such as tobacco, FMCG and hospitality, with an estimated value between ₹11,000 crore and ₹30,000 crore.

Recent legal proceedings have focused on the division of assets, particularly within Godfrey Phillips India. Bina Modi, who continues to manage the company, was recently granted permission by the Delhi High Court to exercise her voting rights at the company’s annual general meeting on 6 September.

This decision came amid challenges to her leadership, with proxy advisory firms recommending that she be removed as MD. The dispute dates back to 2014, when KK Modi’s family executed a trust deed to ensure equal distribution of assets. Since then, legal battles have ensued over family members’ exclusion from key roles and asset management. The Delhi High Court is expected to hear the case again next month.

Chhabria family dispute: The Finolex Cables dispute involves legal battles over share transfers and governance following founder Pralhad Chhabria’s death. He initially appointed his daughter Aruna Katara, son Prakash Chhabria, and nephew Deepak Chhabria as successive chairpersons of the Pralhad Chhabria Trust in his succession plan, but this was altered before his death. Pralhad transferred 80% of his shares to his son, Prakash, and nominated him to the board, bypassing the 2012 trust deed.

On 28 August the National Company Law Appellate Tribunal (NCLAT) refused to overturn a decision made at the company's AGM in 2023, when shareholders voted against Deepak Chhabria’s reappointment.

Hinduja family dispute: This is a high-profile legal battle among the Hinduja brothers – Srichand, Gopichand, Prakash and Ashok – for control of the $18-billion Hinduja Group. The conflict arises from a 2014 family agreement that stated, "Everything belongs to everyone." Srichand’s daughter Vinoo has challenged this agreement as she seeks to assert control over her father’s assets. The diversity of the group’s interests – banking, automotive and energy – adds to the complexity of the dispute.

Singhania family dispute: This dispute centres on Gautam Singhania’s leadership of Raymond Ltd, arising from allegations by his father Vijaypat Singhania about financial mismanagement and control over a Mumbai property.

Munjal family dispute: The dispute involves the descendants of Hero Group’s founders, who are fighting for control of Hero MotoCorp.