Amid the Kirloskar family feud, the NCLT’s Mumbai bench has ruled that Kirloskar Industries, (petitioner in the case and controlled by Atul and Rahul Kirloskar), can sell shares in Kirloskar Brothers. However, they must first offer them to Sanjay Kirloskar and his nominees. If Sanjay Kirloskar declines within 30 days, the petitioners can sell the shares to others via off-market or on-market transactions. The bench also noted that since this involves a transfer among promoters, it falls outside the scope of the Substantial Acquisition of Shares and Takeovers Regulations, 2011, exempting it from open offer requirements.
The Kirloskar family is entangled in a legal dispute over group assets, pitting Sanjay Kirloskar, chairman of Kirloskar Brothers (KBL), against his brothers, Atul and Rahul. The trio are sons of Chandrakant Kirloskar and grandsons of the industrialist SL Kirloskar. KIL, controlled by Atul and Rahul Kirloskar, holds a 24.93% stake in KBL. According to the Deed of Family Settlement (DFS), the petitioners were allotted shareholding in KBL to equalise the wealth of various family factions within the Kirloskar Group.
The bench said in alignment with the spirit of the Deed of Family Settlement of the Kirloskar family members, Sanjay Kirloskar would retain the control and management of KBL. Sanjay Kirloskar (Respondent no. 2) has the first right to refusal when Kirloskar Industries Limited (KIL) is selling the shares.
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The bench said that the operations of KBL were being mismanaged and lacked transparency and independence, thus validating KIL’s claim of oppression and mismanagement. It further stated that the conduct of KBL’s affairs was influenced by the ambitions of Sanjay Kirloskar and his family members. The bench noted that this influence affected the decisions of KBL’s Board of Directors, compliance officer, and their involvement in legal proceedings. Additionally, the Tribunal observed that KBL, despite being a publicly listed company, did not remain neutral in the dispute, with most of its submissions aligning with those of Sanjay Kirloskar, whom KBL actively defended.
The bench further observed that the timing and manner in which KBL’s Board recorded the Deed of Family Settlement (DFS), seven years after its execution, strongly suggest that this action was orchestrated by Sanjay Kirloskar to ensure KBL’s compliance with the settlement.
Since the DFS doesn’t impose any restrictions on transferring or dealing with KBL shares, Sanjay Kirloskar and his family cannot assert full ownership and control over KBL. The Tribunal noted that according to the wealth equalisation principle outlined in the DFS, the petitioners had the right to monetise their shares as they saw fit.
The petitioner, KIL had alleged mismanagement of KBL and lack of independence of the board of KBL. They also raised concerns about the legal expenses, being incurred by KBL, to fight the personal battles of its chairman and managing director, Sanjay Kirloskar.
In several such cases, the bench had ordered that one of the groups should go out of the company on receipt of fair value for their shares. “As the Respondent No. 1 company has been in business for the past over 100 years with a large number of employees and shareholders, it would not be in the interest of the said company or the shareholders to wind up the company,” the bench said. The bench said the order took into consideration the situation of two warring factions of a prestigious family and the consequent adverse effect on the public shareholding in the listed companies involving more than 60,000 public shareholders, and it was also in alignment with the spirit of DFS.
On May 21, Justice V G Bisht (retd.), Member (Judicial), and Prabhat Kumar, Member (Technical), issued the order concerning a petition filed by Kirloskar Industries (KIL). The petition was filed against Kirloskar Brothers (KBL), Sanjay Kirloskar, and his family members, alleging mismanagement and oppression of minority shareholder interests.
Further, the bench in accordance with the spirit of the Deed of Family Settlement among Kirloskar family members, Sanjay Kirloskar would maintain control and management of KBL. Sanjay Kirloskar (Respondent no. 2) holds the first right of refusal if Kirloskar Industries Limited (KIL) sells shares.
From: financialexpress
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