A bitter suit (at Raymond)

Taking risks has never been a problem for him, be it travelling in a hot air balloon to set a world record at age 67 or doing a solo flight in a microlight aircraft from the UK to India in 1998. But today, the 78-year-old Vijaypat Singhania, chairman emeritus of one of India’s largest clothing brands, Raymond, is an unhappy man, torn by a family dispute that involves, among others, his younger son Gautam Singhania, now chairman and managing director of the Rs 5,000 crore-plus company.

Vijaypat, who stepped down as chairman of the 90-year-old company in 2015 after handing over the reins to Gautam, has moved the Bombay High Court seeking possession of a duplex flat in the 37-storey JK House situated in Mumbai’s tony Breach Candy area. JK House, a Raymond property since 1945, went for redevelopment in 2007 following tripartite agreements signed between the company, Pashmina Holdings (a Raymond arm that leased JK House from the company) and the building’s then tenants who occupied four of its five duplex flats-Vijaypat Singhania, Veenadevi (widow of Vijaypat’s brother Ajaypat Singhania), her sons Anant and Akshaypat, and Gautam. While Veenadevi and her sons have filed a joint petition in the HC over possession of two flats, Vijaypat has filed an independent petition staking claim to one of the redeveloped flats, which he feels is rightfully his.

Herein lies the genesis of the dispute. When the property (then a 14-storey structure) was given for redevelopment, the agreement between the developer and the tenants was that they would get a 5,185 sq. ft duplex flat each in the new building on a payment of Rs 9,000 per sq. ft, which was calculated on the basis of the then ready-reckoner rates put out by the Brihanmumbai Municipal Corporation. However, by 2016, when the flats were ready, the rates had moved to over Rs 1 lakh per square feet, claim Raymond insiders. Giving the flats at the old rates to the tenants would result in a huge revenue loss for the company (estimates say around Rs 650 crore). This was apart from issues of corporate governance, where family members were being allotted flats at less than 90 per cent of the market rates in a company-owned property. Raymond placed the original proposal before the company’s board, which decided to put the matter to shareholders for approval. In June, shareholders rejected the proposal with 97 per cent voting against the move.

This has left Vijaypat, who had steered Raymond-a leader in the worsted (wool-based) fabric and suiting segment with 60 per cent market share-since 1980, and members of his late brother’s family, visibly upset. He feels that Gautam needlessly took an issue that could have been decided at the board level to the shareholders, thereby denying him a rightful home. His son, to whom he had transferred his 37 per cent stake in Raymond worth over Rs 1,000 crore, had turned his back on him. “I do feel I am right, I do feel I have a right to the property I’m fighting for,” says the septuagenarian. “We have a legal agreement for it, he (Gautam) is backing out of it. He wants to dishonour it.” However, contrary to initial media reports, he clarified that he has enough money to sustain himself, and that his son cannot reduce him to a “hand-to-mouth” existence.

Gautam, 51, an avid racer and the first Indian driver to win a race in the Ferrari Challenge Europe Championship 2015, however, feels that he has separate roles and responsibilities as chairman of Raymond and as Vijaypat’s son. “All the relevant facts were put before the shareholders for a considered decision. They rejected the tripartite agreement,” he says. That said, Gautam has gone on record stating that if he were to vote, he would have voted against the resolution in the interest of shareholders and the company. “Shareholder interest is paramount and supersedes family interest. I welcome their decision in this regard,” he’d said.

Raymond was part of the legendary JK Group founded by Juggilal Singhania and Lala Kamlapat Singhania in 1918. It was one of the three big business empires in India, after the Tata and Birla groups, but was later split into three, headed by Gaur Hari Singhania in Kanpur, Hari Shankar Singhania in Delhi and Vijaypat leading Raymond in Mumbai.

There’s more to Vijaypat’s bitterness over his son “dishonouring” his word. When the group patriarch transferred his stake to Gautam as a “gift” (which he now seems to regret), it actually set off another legal battle in 2015. Four of Vijaypat’s grandchildren moved the Bombay High Court staking claim to the family wealth. These were the children of Vijaypat’s estranged elder son Madhupati Singhania, now settled in Singapore, who sued their grandfather and Raymond saying Vijaypat had no authority to sign away their ancestral rights. They challenged an agreement Madhupati and his wife Anuradha signed in December 1998, as part of a family split, giving up their own and their children’s rights to the Raymond empire, as well as other assets, including real estate. The grandchildren-Ananya, Rasaalika, Tarini and Raivathari-claimed, according to reports, that they were informed of the agreement only when the youngest of them turned 18. Raymond insiders say the HC has quashed the plea since the grandchildren did not move court within a year of them reaching 18. The court also took note of Madhupati’s flamboyant lifestyle in Singapore, including his $45,000 yacht.

After JK House was given for redevelopment, the tenants moved to rented flats in the city, except Vijaypat, who moved into his ancestral home, Kamla Cottage, in Juhu. However, following a complaint filed by Madhupati in 2015 in the Bombay High Court, which claimed that his father had not adhered to a 2008 arbitration order over possession of Kamla Cottage and hence must vacate it, Vijaypat moved to a rented duplex in Grand Paradi in Breach Candy. He has made a claim for a monthly rent of Rs 7 lakh for this home, on which Raymond is yet to take a decision. “The matter is in court. Whatever its decision, we will abide by it,” says a senior Raymond executive, preferring not to be named. Incidentally, Gautam now lives in one of the duplex flats in JK House. Sources in the company say he stays there in lieu of claiming HRA as part of his salary. The petitioners have challenged this too. The next hearing is on August 22.

So why did the father gift away his wealth to his younger son, reducing himself to a situation where he has to fight a legal battle even to pay his rent? Company insiders are tight-lipped about it, but they say that though Gautam had become MD in 1999 (soon after the family split), it was only after the transfer of Vijaypat’s stake in 2015 that he has been able to take major decisions about company operations. “We are working on Raymond 2.0, our strategy for the future spearheaded by the CMD (Gautam),” says the executive quoted above. That required a delinking of family and corporate roles, an “enabling factor towards a reimagined Raymond”.

To be sure, Gautam has effected a turnaround in the business after he took over the reins of the company. He sold off non-core businesses such as cement, steel and synthetics to pay off debt, acquired retail brand Color Plus-it also owns the Park Avenue and Parx brands-and set up a new textile factory in Vapi. He also restructured the firm (it has 1,080 stores in India, the Middle East and the SAARC region) into five strategic business units-shirting, suiting, apparel, garmenting, exports and custom tailoring-and brought in a new set of managers. Gautam is also creating new business streams to convert cyclical revenue flow to round-the-year business while raymondnext.com, a digital initiative, counters the threat from e-tailers. Exports to Europe and the US have been boosted by a new plant in Ethiopia. The results are showing. The company, which had two consecutive years of losses not so long ago, turned a profit of Rs 26 crore on sales of Rs 5,509 crore in 2016-17.

The new twist in the Singhania family dispute is the latest in the family wars that have smeared Mumbai’s corporate landscape. In 2005, the Reliance empire was split between brothers Mukesh and Anil Ambani. In 2016, Priya Vandrevala, daughter of real estate tycoon Niranjan Hiranandani, dragged her father and brother Darshan Hiranandani to court over breach of a business agreement. Brothers Shardul and Cyril Shroff, the country’s top corporate lawyers, split up the family firm in 2015. “Transfer of wealth to the next generation is a teething problem in corporate India,” says Shriram Subramanian, MD of InGovern Research Services, a proxy firm that also advised Raymond shareholders on the JK House issue. “Unfortunately, many Indian promoters still consider company properties as their own.” This leads to acrimonious legal suits later on.

Will the bitter battle find a happy ending? With multiple actors engaged in a complex legal war, an amicable ending is unlikely to come easily. In all likelihood, the courts will ask the concerned parties to settle the matter out of court. Gautam, for one, has reiterated that he has been in “constant dialogue with my father and family” to “resolve their personal issues over the past two years”. He claims that at least on 15 occasions in the past two years, the two reached an “amicable understanding”, but certain “vested interests” then derailed the discussions. As the Singhania clan awaits the court’s directive, Vijaypat, who wrote a book, Angel in the Cockpit, on his solo 7,200 km flight from the UK to Mumbai, is optimistic: “I have a strong case in court. Maybe it will go for arbitration as required by law. Wait and watch.”

Link: India Today – 17 Aug 2017