INDIA BUSINESS WORLD - MAY 2006
THE MONTH THAT WAS...

CHINNA VEEDUS 'R' BIG PROBLEM: INDU MARRIAGE ACT HAS NO PLACE FOR THE SECOND FAMILY

 TILL death do us part is fine. But what follows is partition and that turns messy in the case of a string of wealthy industrial families where second wives, their progeny and chinna veedus (small houses) throw up a host of claimants to the property, whose legal status the Hindu Marriage Act fails to clearly define.

After high-profile cases like the Birla-Lodha will tangle or the more recent tussle between two strands of the Delhi-based Jaiswal family, lawyers specialising in succession-related cases are beginning to come around to the view that the Act is turning into a huge headache for some of India's top business families. But first, the facts. In the Priyamvada Birla-RS Lodha case, MP Birla's brother Gajanan Birla's second family — comprising wife Sumitra, daughters Gita Sanghi and Anjali Sawhney and son (late) Madhukar Birla's wife Radhika and children Paritosh and Rakshita — came into the picture once it became clear that the will was to be contested. Ms Sanghi consulted Kolkata-based lawyer Pramod Khaitan to check out the second family's position as claimants to uncle MP Birla's estate. In the more recent Jagatjit Industries case, Anand Jaiswal — founder LP Jaiswal's son from his second wife — has moved court in the State of Jersey disputing the promoter shareholding in the liquor company. Half-brothers Karamjit and Jagatjit Jaiswal have recently settled the control issue in the company and the current legal spat is about GDRs willed to Karamjit who controls and runs Jagatjit Industries.

These, of course, aren't the only spats involving first and second families of business patriarchs. A decade ago, a similar tug-of-war in a prominent Delhi-based automotive company ended with the eldest born in the first family assuming control over the flagship. Similarly, in another bluechip Delhi group, the Pater Familias has managed to divide responsibilities in group businesses between his children — both from his first and second wives — and his nephew.

If there is a will, it supersedes all claims. If not, the assets go to everyone, both the legal successors as well as the second family. The importance of drafting the will correctly has gone up, particularly in businesses with crossholdings.

Lawyers ay the succession issue can get tricky when there is a second family involved particularly in pre-1956 marriages. While the legality of the second marriage offspring is one aspect, the other is their role vis-a-vis family assets. Says a senior Supreme Court advocate: “If there is a will, then it supersedes all claims. If not, the assets go to everyone, both the legal successors as well as the second family.” Lawyers say the high-profile Birla-Lodha case is prompting top business families to hammer out cast-iron wills.

Says Som Mandal, managing partner Fox Mandal, solicitors in the Birla-Lodha case: “Now the importance of drafting the will correctly has gone up particularly in businesses where there are crossholdings. The interpretations are important so no one wants to take a chance.”

Second family succession hiccups aren't peculiar to north Indian business houses alone. Down South, a widely prevalent practice called the chinna veeda is now throwing up similar issues. Traditionally, the chinna veeda literally means the small house and that conveys the fact that it was a recognised establishment. Typically, the man would spend weekdays with the official wife and weekends with the second family at the chinna veeda. Some of the richer patriarchs like Sreesailam of the Amalgamations group installed their second wives, in his case the dancer Lakshmi Vishwanathan, abroad, in London.

The chinna veeda wasn't a great system, but it made matters clear about who stood where and what their expectations and rights were. Nearly all the big industrialists down South used to have chinna veedas and many still do. The problem is that these days the concept is getting blurred with regular marriages and the rights that it confers, and this disrupts the concept by upsetting the strict division of rights and responsibilities.

Says a Supreme Court advocate: “Where assets go by Hindu undivided family, a second marriage can create stake holding problems.” Clearly marriages may be made in heaven, but on earth they have the potential to create some pretty knotty legal tangles.