Cracks in the Kirloskar family, which controls the 130-year-old Kirloskar Group, have widened. Brothers Rahul Kirloskar and Atul Kirloskar have approached the Mumbai bench of the National Company Law Tribunal (NCLT) to oust sibling Sanjay Kirloskar as chairman and managing director of Kirloskar Brothers Ltd, alleging oppression and mismanagement in the group’s flagship company. They are also seeking the removal of the rest of the current board members and have sought the appointment of their own nominees on the board.
In their petition, Atul Kirloskar and Rahul Kirloskar have alleged that while the board has been arbitrarily rejecting their pre-clearance request for selling or buying shares, Sanjay Kirloskar has been increasing his shareholding in the company.
BSE-listed Kirloskar Brothers Ltd’ code of conduct for promoters and other key management personnel requires them to take the board’s clearance before buying or selling the company’s shares.
“(The board is) coercing petitioner No. 2 (Rahul) to only sell the shares to respondent No. 2 (Sanjay) under the false pretext of deed of family settlement (DFS),” says the petition, a copy of which was reviewed by Mint. “Respondent No. 2 has repeatedly misused his position of being the chairman and MD of Kirloskar Brothers and acted in the manner prejudicial not only to the interest of the petitioners (Rahul and Atul) but also detriment of the Respondent No. 1 (Kirloskar Brothers).”
The Kirloskar promoters had entered into a DFS in 2009 to distribute their assets in the form of shares of various companies in Kirloskar Group and cash held in trust and investment companies, among the signatories of DFS, to avoid a potential dispute within the family.
Rahul and Atul now claim, through the petition, that the board’s continuing rejection of their pre-clearance request contravened the letter and spirit of the DFS.
“The DFS does not contain any fetters on any of the signatories to either buy or sell shares in any of the companies mentioned therein or any right such as right of first refusal, pre-emption or right of the first offer etc. that may compel any of the parties to buy or sell shares to/from one another,” the petition says. “There is no such restrictive covenant in the DFS.”
Rahul and Atul, who are into the business of renewable energy and investments through listed company Kirloskar Industries Ltd (KIL), are now seeking the appointment of an independent chairman or administrator as well as petitioners’ nominees on the board of Kirloskar Brothers.
The petitioners have named, apart from Kirloskar Brothers and Sanjay Kirloskar, other Kirloskar Brothers board members as respondents. The Kirloskar Brothers board currently includes Lalita D. Gupte, former joint managing director at ICICI Bank and Kishor A. Chaukar, former managing director of Tata Industries Ltd. Former Reserve Bank of India (RBI) deputy governor Rakesh Mohan is an independent director but is not named in the petition. It is possible he joined Kirloskar Brothers after the petition was drawn up.
The petition also requests the tribunal to appoint an independent auditor to conduct a forensic audit of Kirloskar Brothers’ books of accounts and affairs till the pending hearing and final disposal of the case. The estranged brothers are also seeking the tribunal’s intervention to allow them to buy or sell shares; the petitioners had made three pre-clearance requests from Kirloskar Brothers, all of which had been rejected.
The Mumbai bench will hear the case on 17 December.
In June, Sanjay Kirloskar petitioned the Pune city civil court against Atul, Rahul, cousin Vikram and late cousin Gautam Kulkarni’s family, alleging breach of DFS, and sought damages of ₹750 crore from the family members.
Founded by Lakshman Rao Kirloskar, the Kirloskar Group is one of the earliest Indian engineering conglomerates. Later, his three sons, Shantanu, Prabhakar and Ravi Kirloskar took over the group’s reins.
Shantanu Kirloskar has three children, Chandrakant, Sarojini Amin and Srikant. Atul, Sanjay and Rahul are part of the Chandrakant Shantanu Kirloskar Hindu Undivided Family, which entered into a formal DFS in 2009, along with other Kirloskar family members.
Source: Mint