Kindred hearts and balak buddhi help easily share anything, including an ice cream cone!
As business families become bigger and kids grow up, generosity turns to greed and family disputes become common.

This column, in the past, has explained many such cases.
Yet another is discussed below, based on a recent order issued by the national company law tribunal (NCLT).
Vadilal Gandhi, more than a century ago, established a soda fountain in Ahmedabad and later expanded into selling ice cream under the brand of ‘Vadilal’, a name which, in due course, became synonymous with ice cream, at least in the western parts of the country.
The founder’s son Ranchod Lal brought in German technology to manufacture ice cream, a pioneering step at that time.
Vadilal was most likely the pioneer in branding and selling ice cream in parlors at a time when these were vended on the streets, dished out from rusty and rickety carts.
The clan’s third generation of Ramachandra Gandhi and Laxman R Gandhi, the two sons of Ranchod Lal, saw the flowering of the business with a listing in the stock exchanges, an overseas presence and standing up to the competition of global brands that came in the wake of the liberalisation of this sector in the 1990s.
The Ram-Laxman association seemed to have prospered well with a healthy growth in the business that grew from around Rs50 crore in 1996, to nearly Rs300 crore by 2012, despite the headwinds of competition unleashed in the post-liberalisation period.
The main company in the group, which is also listed on the stock exchanges, is Vadilal Industries Ltd (VIL). It currently has a market cap, a tad upwards of Rs3,000 crore.
The Vadilal family owns 64.73% of the shares of VIL. Out of this, 39.09% is held by Vadilal International P Ltd (VIPL), a closely-held family company.
VIPL also owns the brand ‘Vadilal’ and gets a royalty from VIL, the main entity.
There is another listed entity, Vadilal Enterprises Ltd, a distributor of the products and carries no significant market valuation.
Until around 2012, Ramachandra Gandhi was at the helm of affairs. Despite the occasional turbulence caused by the members of the next generation entering the business, there existed no serious risk to the group staying together.
However, in due course, the emerging fissures in the family caused more than one family agreement to be entered into between the descendants of Vadilal.
In one such agreement entered into in the early 1990s, Sailesh Gandhi, one of the three sons of Ramachandra, parted ways.
The other two sons of Ramachandra—Virendra and Rajesh, together with Devanshu, the son of Laxman, constituted the phalanx of the fourth generation.
The management structure of VIL as seen from the annual reports reveals that Ramchandra, as the patriarch, was heading the company up to 2012 as the non-executive chairman.
The three belonging to the next generation, Virendra, Rajesh and Devanshu were designated as managing directors.
Due to old age, Ramachandra had stepped down from his responsibilities around 2012. He passed away in 2014.
By September 2013, Virendra had ceased to be a director of VIL. Rajesh and Devanshu continued as the managing directors, drawing remuneration.
The family dispute that landed in NCLT, based on a petition filed by VRG (Virendra), is about his grievance of being sidelined, illegally removed from the directorship of the various entities, and being kept out of the management of VIL by the other two, Rajesh (RRG) his brother, and Devanshu (DLG), his cousin.
The principal contention is that the family agreements entered into from time to time, in essence, constitute an equal partnership among the three groups.
That the families of VRG, RRG and DLG have an equal status in the ownership and management of the Vadilal group.
And all the three had an equal right to all the benefits and privileges of the family enterprises.
Since VIPL had a 39.09% shareholding in VIL, RRG and DLG, by controlling the board of VIPL, managed to keep VRG out of the listed company and its directorship and thereby the attendant benefits and the remuneration.
The actions of RRG and DLG amounted to oppression.
The allegations in the petition also included financial mismanagement and swindling of funds by RRG and DLG and charging of personal expenses to the company accounts.
The family dispute, when it cropped up, had more than its share of impact on the listed entity. Two of its independent directors resigned as a consequence of the alleged financial irregularity.
Once these allegations were levelled in 2018, the auditors, Deloitte, made a disclaimer about the impact of the dispute on the financials of Vadilal Industries.
VIL’s board appointed a forensic auditor and a legal counsel to investigate the charges of mismanagement and financial irregularities.
Statedly, Deloitte did not get much cooperation and resigned from the audit in November 2019. An email sent a few months before their resignation captures their dissatisfaction.
A new auditor, Arpit Patel and Associates, was appointed in the casual vacancy caused by Deloitte’s resignation, and stays till date as the auditor of VIL.
The forensic auditor and the legal counsel had submitted their reports sometime in 2021. It can be reasonably inferred, based on the notes in the accounts, that they did not report any financial irregularity.
However, the forensic report appears not to have closed out the issue of the allegation of charging of the personal expenses by the directors in VIL’s accounts.
Even the latest audit report for the financial year ended 31 March 2024 carries the following note and the auditor continues to disclaim the opinion!
In disposing the petition on oppression and mismanagement, NCLT took into consideration the various steps taken by RRG and DLG to keep VRG out of the business of the group, to strip him off his directorship of VIL, denying him the equal role that is enshrined in the family agreement, and held the cumulative conduct amounted to oppression.
NCLT listed out the various actions that constituted the oppression of VRG by the other two. These are listed below:
Recognising the fact that VIL is a publicly listed entity with a large body of external shareholders, NCLT came to the conclusion that a winding up of the company and a division of assets of the businesses was not feasible among the three warring factions.
The only solution that appeared workable was to let one or more of the members of the family buy out the other, or a third party take the shares.
Some salient directions in NCLT’s order are given below as they constitute a unique case of resolution of a family dispute touching upon various corporate entities, one among them being a listed entity with numerous public stakeholders.
NCLT says:
“All the Vadilal Gandhi family businesses be divided amongst three families i.e. VRG family, RRG family and DLG family, by appointing court commissioner. If any of one family is ready to purchase the shares held by other families, they can do so mutually, subject to the provisions of law.
Dharmishta Raval, advocate, is hereby appointed as a court commissioner to conduct division of Vadilal group businesses. She is entitled for commissioner’s fee of Rs5 lakh each from Virendra R Gandhi, Rajesh R Gandhi and Devanshu L Gandhi.
Till the assets of group companies are divided and audit, and valuation is done, an independent observer viz Maheh Shah, ex-director general, Union ministry of corporate affairs (MCA), is appointed to oversee the conduct of board in conducting the business affairs of the entire Vadilal Gandhi family businesses and its compliances. Honorarium of Rs2 lakh per month will be paid jointly by Vadilal group companies to the observer.
A Valuer (IBBI Registered) be appointed to ascertain valuation of all Vadilal Gandhi family businesses and its assets as on 31 March 2024.
Delloite is appointed to do a special and secretarial audit to verify books of accounts of all related party transactions of the family members of VRG, RRG and DLG in all the companies from 2010 till the date of this order and report any irregularities to the board with copy to the registrar of companies (RoC) and MCA.
Till the companies are mutually divided amongst the three families, equal family members be appointed in VIPL, VIL and VEL with same ranking and remuneration."
There are a few other directions, including a levy of costs on all the parties for filing multiple documents considered redundant by the court, but in the interest of space, only the key ones are extracted here.
In this case, the two groups that managed to keep VRG out of the business could easily achieve their ends as they had secured control of the private family company, VIPL, by allegedly manipulating the proceedings of the board and the minutes of the meeting and taking other illegal steps.
Once VIPL came under their control, exercising control on VIL became easy due to its significant shareholding in the latter.
An important takeaway from this case is the risk of a single-unlisted family company having a controlling stake in a listed entity, like VIPL has in VIL.
If VRG had held the shares directly in the listed entity, he could have explored the option to hawk it to an interested party, even to a competitor, to spite the other two factions that acted maliciously!
A mere family arrangement may be of little avail if some of the family members conspire to defeat the rights of another member.
It is important to adopt a shareholding structure that gives enough flexibility to exit if necessary. Not have all the ice cream in a single cup, so to say!
It is quite surprising that, despite the mutual mudslinging by the key personnel managing VIL, a specific disclaimer by the auditors that they are unable to opine if the books are fine, two IDs resigning, and a leading audit firm quitting midway, neither the Securities and Exchange Board of India (SEBI) nor MCA initiated any steps to independently investigate the issues of a company with more than 14,000 public shareholders.
It is also a puzzle why Deloitte and the new auditor were not able to verify if expenses of a personal nature were charged as alleged, as it is very much within the scope of any basic audit to do.
SEBI and the department of company affairs should have stepped in early in this drama and commissioned an independent investigation into the affairs of VIL, its books of accounts, and whether the board process and governance were duly carried out.
VIL, as a listed entity, should make proper disclosure of the aspects that impinge on its functioning like the new chairman being nominated by NCLT to oversee its functioning, direction that all family members enjoy the same position and remuneration in the company, and the forensic audit of related party transactions to be carried out by Deloitte. It is yet to make any such disclosure.
It will only unfold in the future, whether the three factions will bury the hatchet and agree on a closure and a mutual separation on the lines suggested by NCLT.
Quite understandably, the lawyers advising the parties may point to the existence of appellate bodies to keep their pots boiling!

(Ranganathan V is a CA and CS. He has over 43 years of experience in the corporate sector and in consultancy. For 17 years, he worked as Director and Partner in Ernst & Young LLP and three years as senior advisor post-retirement handling the task of building the Chennai and Hyderabad practice of E&Y in tax and regulatory space. Currently, he serves as an independent director on the board of four companies.)