The enigmatic pact at the base of the Hinduja split

The latest news, emerging after London law courts intervened to broker peace, suggests that a truce is in place, however tenuous it may sound. The courts intervened after it became evident that the warring had left octogenarian family patriarch Srichand P. Hinduja, suffering from dementia, and his branch of the immediate family without access to the group’s cash flows.

The starting point for the dispute appears to be the seemingly enigmatic pact signed by the four brothers in 2014: “Everything belongs to everyone and nothing belongs to anyone”. The pact bears Srichand’s imprint, a testimony to his spiritual journey over the past three decades. The contract invokes the traditional spirit of trusteeship, a socio-economic concept popularised by Mahatma Gandhi, which inherently discourages individual ownership of wealth or assets, encouraging custodial behaviour and bestowing equal rights to all community members. In this case, all the group’s assets belong to the four brothers – “everything belongs to everyone” – and, by extension, to all the family members of the four Hinduja brothers.

The cracks started appearing after the onset of Srichand’s age-related illnesses and his purported inability to manage some of the group companies; the other brothers thereafter stepped in and tried to manage these assets. This led to Srichand’s immediate family members – his wife and daughters – requesting the courts to revoke the pact. Their allegation: Srichand’s family was being deprived of their legitimate share from the earnings.

There could be another possible reason for the rift. Srichand’s three brothers – Prakash, Gopichand and Ashok – may not have been part of the same spiritual journey, failing to understand the universality of the message; or its permanent, inviolate characteristic. Extending the same logic, the pact’s import was probably understood even less by the second and third generations. Srichand suffered a deep shock after the unfortunate demise of his son, Dharam Hinduja, about 30 years ago, intensifying his spiritual quest. In that sense, some of his self-actualisation in subsequent years may have been a lonely traverse and not shared equally with his brothers, thereby sitting at odds with “everything belongs to everyone”.

Whatever the reasons for the visible rift, or the clauses of the court-mediated truce which remains confidential, it holds out a critical lesson in succession planning for family-owned businesses.

The genesis of the Hinduja family spat can, perhaps, be traced to the way the Hinduja family was seen in the public eye: with Srichand always in the lead, shepherding the rest of the family and helming all key decisions. All alliances and associations – strategic or tactical, local or global – had to first pass the Srichand smell test; he would listen to all suggestions, seek counsel and finally take a decision which would be binding on everybody in the family, near or distant.

This patriarchal structure not only emerged from tradition but was solidified due to the trying conditions through which Srichand had to steer the family businesses. He had to take over the group’s reins at the age of 36 after their father, Parmanand Hinduja, passed away in 1971. The second shock – perhaps the harshest – came soon thereafter in 1979 when a popular uprising in Iran replaced the Pahlavi dynasty’s ruler with an Islamic republic.

Parmanand Hinduja had set up extensive trading links with Iran, which included opening their offices in the nation way back in 1919 and subsequently shifting the group’s headquarters there. The 1979 revolution forced Srichand to move the office to London. This was not just a simple issue of shifting a physical office; the Iran government had historically been the group’s major trading partner and the 1979 revolution left a huge gap in the group balance-sheet. Srichand rebuilt it all back, brick by individual brick, across national boundaries and jurisdictions.

Srichand also helped dispel some other subsequent clouds over the family business, which included allegations about improper dealings. The group’s dependence on Srichand was complete and unquestioned. Consequently, “everything belongs to everyone” did not brook any resistance or opposition from any brother, regardless of how inadequate the pact was for future succession planning.

Ideally, Srichand should have laid out a detailed succession plan for each member of the Hinduja third generation, many of whom have already been inducted into the managements of various group companies. There were many templates and examples already in existence. The Delhi-based DCM Group’s bitter, prolonged and public disputes among the second and the third generations was due to the lack of proper succession planning. In contrast, G D Birla’s carving up of the Birla empire among various sons and nephews during his lifetime reduced friction considerably, even though the division of assets did not align with everybody’s aspirations.

A detailed, planned succession strategy would perhaps have saved the Hinduja family the ignominy of court mediation, after decades of presenting a united front.