Business

Murugappa Group Set for Legal Battle Over Valli Arunchalam’s Quest for a Board Seat

Valli Arunachalam has brought up the gender question, an issue that has added a distinct flavour to this family dispute.

The family dispute within the Chennai-based Murugappa group is set for a legal battle with Valli Arunachalam, karta of the MV Murugappan HUF (Hindu Undivided Family), signalling her family’s decision to “leave no stone unturned” to get justice.

The declaration of such an aggressive intention comes in the wake of shareholders rejecting a resolution that would have appointed Valli to the board of Ambadi Investments Ltd. (AIL), the holding company of the Murugappa group.

The resolution was thrown out by the shareholders at the annual general body meeting two weeks ago. The unlisted AIL is controlled by various family members.

“With the family voting unanimously to reject my appointment to the AIL board, we have seemingly reached the end of the road for an amicable settlement,” she said in a statement.

Being the karta of MV Murugappan HUF, she has since served legal notices on Murugappa family members, the management of Ambadi Investments Ltd. and others.

“It was a big step for us and a very unfortunate one, as we have worked tirelessly over the course of the last three years to bring about an amicable settlement of my father’s interests in AIL,’’ she said.

“It would be impossible to enumerate each step we have taken over the last three years but we can assure you that we, together with our advisors, have taken the ‘leave no stone unturned’ approach in an effort to bring about an amicable settlement.”

“Such efforts include, inter alia, a proposal for the engagement of an independent mediator. Each entreaty has been met with some combination of silence, combativeness, false assurances, and delay tactics,” she said.

Also read: In Valli Arunachalam’s Tussle With the Murugappa Group, a Familiar and Bitter Family Tale

Indicating that her family branch has not been treated fairly over the last three years, she asserted that “we have no confidence that our substantial stake in the family business will be safeguarded by them”.

Valli Arunachalam has also brought up the gender question, an issue that has added a distinct flavour to the family dispute.

“What is clear to us after three years is that the family’s tactics are nothing more than a robe to conceal their socially regressive gender bias. With only female heirs, the historically male-dominated family business is effectively asking that my family assume a second class standing in AIL without any of the rights or privileges enjoyed by other families (many of whom have equal economic interests),” she said.

“A considerable portion of my late father’s estate is tied to AIL, and it is entirely unreasonable to expect my family to relinquish control and visibility over these holdings to the broader Murugappa family. To date, no logical or legally valid explanation has been provided by the Murugappa family as to why my family should be subordinated in this manner.”

There had been disputes in the group earlier too. The differences within the family were largely responsible for an outsider – one of the original founders of Infosys – getting drafted to head the Murugappa group sometime in the 90s. That was the first time in the annals of the group that a non-family member was appointed as head. Things were sorted out subsequently and it became a pioneer in forming a group corporate board. Since then, succession within the group has largely been smooth.

Given this, the Valli Arunachalam episode has grabbed attention. The Murugappa group is not willing to make any official comment on this issue. In a business enterprise controlled by a large family, which is expanding and adding members, this issue is bound to crop up inevitably. In such a situation, the representation in the holding company becomes the subject matter of intense debate.

Also read: Why Returns Generated by Family Run Companies Outdoes Non-Family Ones

With increasing numbers of women entering family businesses in more active roles, regulators are also coming up with rules to empower women, so as to bring balance in an enterprise.

This issue, however, gets complicated when it comes to the holding company, an unlisted family enterprise at that.

Tamil Nadu, long considered a citadel of family business, has over a dozen well-known traditional family business groups that have thrived for generations in the post-Independence and liberalisation era. These include Murugappa, TVS, Rane, India Cements, Sanmar, MRF, Apollo Hospitals, Ramco, KCP, Lakshmi Mills, Elgi group, LMW, Sakthi Sugars group and Bannari Amman, among others.

Some of them have managed to create separate platforms for female family members, beyond their family enterprises, to help them pursue lines of their interest.

In still others, women members actively participate in the running of family enterprises. Be it the TVS group or Apollo Hospitals and the Amalgamation group, women members are on the forefront. This is true in the case of India Cements, too. Depending on the composition of the base family, some management structures were put in place long ago. There may be additions in the meanwhile, following the induction of extended members to the family. The original structure, as a consequence, comes under stress.

The Valli Arunachalam imbroglio is a reflection of this stress. This needs to be navigated without any serious damage to the assiduously built reputation of any family enterprise. The challenge now, for them, is to manage the change happening within itself. That is easier said than done.