The decision of the Kirloskar Industries board to convene an extraordinary general meeting of the Kirloskar Brothers has focused on the Deed of Family Settlement (DFS) signed by the Kirloskar siblings in September 2009 and role of the board of directors of Group companies in implementing the same.
The DFS was necessitated in anticipation of a possible rift in the ownership, management and control of about 18 group companies. A copy of the DFS is available with businessline.
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After signing the DFS, each signatory, their nominees and their respective companies were supposed to implement the DFS with the approval of respective board of directors and comply with the DFS in law and spirit at all times.
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As per the DFS, Kirloskar Group family members and entities were supposed to sell shares of select companies to each other to strike an equilibrium and follow the principles of ownership and management control.
As a result, Atul Kirloskar-led entities and other family members sold shares of Toyota-related entities to Vikram Kirloskar and his nominees in December 2009 after the DFS was signed.
However, in violation of DFS, Atul Kirloskar-led Kirloskar Oil Engines acquired La Gajjar Machineries in June 2017, which competes directly with the pump business of Sanjay Kirloskar-led Kirloskar Brothers. Claiming that the acquisition violates the DFS, Kirloskar Brothers moved to the Supreme Court, and the case is still being heard. One of the Kirloskar factions has claimed that it is a selective implementation of the DFS.
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Last week, Atul Kirloskar-led Kirloskar Industries wrote to stock exchanges that the company’s board has approved to convene of an Extraordinary General Meeting of the shareholders of Sanjay Kirloskar-led Kirloskar Brothers.
Kirloskar Industries owns a significant stake in Kirloskar Brothers.
Among several points raised in the agenda of the proposed EGM, there is a question on steps taken by Kirloskar Brothers to abide by the DFS entered into by the Kirloskar Group.
Kirloskar Industries wrote in a letter: “While Sanjay Kirloskar has been repeatedly claiming that KBL has taken the DFS on record, what steps it has actually taken to bind itself with the DFS, in accordance with the provisions of applicable law?”
In response to the businessline questionnaire, Atul Kirloskar, said “we have consistently submitted before various judicial and regulatory fora, (that) we are neither parties to the DFS nor have we adopted or ratified the same”.
However, he said, “matters are currently sub-judice and hence we would not like to comment on any aspect of the same”.
While the questionnaire to Vikram Kirloskar and Sanjay Kirloskar remained unanswered, it is understood that the Board of Directors of Kirloskar Brothers took the DFS on record in April 2016 and informed the stock exchange accordingly. A copy of the exchange filing has been reviewed by the businessline.
Legal experts have raised serious questions on the role of these Kirloskar Group companies’ boards in implementing the DFS.
Advocate Vishwanathan Iyer, a practising Supreme Court lawyer, said the companies had implemented a share transfer clause in the DFS while violating the non-compete clause.
He said that the Apex court will look into such facts which will have bearing on several family arrangements pending in the courts.