Kirloskar Industries Ltd (KIL) says an order passed by the Mumbai bench of the national company law tribunal (NCLT) has reinforced the allegations regarding the mismanagement of Kirloskar Brothers Ltd (KBL), confirming the lack of independence of the board of directors of the company.
Kirloskar Industries, along with Atul Kirloskar and Rahul Kirloskar, who together hold 24.93% of Kirloskar Brothers, are involved in a fight against KBL chairman and managing director (CMD) Sanjay Kirloskar following a family dispute. Sanjay Kirloskar and his wife Pratima hold 22.07% and 17.33% in Kirloskar Brothers.
In a release, a spokesperson of KIL says the NCLT, in its order on 21 May 2024, held that the affairs of KBL are being mismanaged and are not being conducted transparently and independently. "The Tribunal has further held that the affairs of KBL are influenced and coloured by the aspirations of Sanjay Kirloskar and his family members, in running the affairs of KBL as per their desires and without any interference (from any other shareholder). The Tribunal has further held that this has impacted the decisions of the board of directors of KBL and its compliance officer and its participation in legal proceedings.
"Moreover, looking at the partisan conduct of KBL, a public listed company, the Tribunal has observed that KBL has not remained a neutral party in the matter, contrary to settled law. The Tribunal observed that most of the submissions made by KBL and Sanjay Kirloskar overlapped and KBL has defended Sanjay Kirloskar wholeheartedly," the spokesperson says.
The Kirloskar group has a comprehensive 38-page family settlement signed on 11 September 2009 and has made multiple visits to all the available forums to resolve disputes among a plethora of cousins.
In 2017, Kirloskar Industries, Atul Kirloskar and Rahul Kirloskar (petitioners) filed the petition before NCLT against Kirloskar Brothers and its CMD Sanjay Kirloskar. They alleged oppression and mismanagement by Sanjay Kirloskar and pleaded for the removal of Sanjay Kirloskar owing to oppressive acts and mismanagement in Kirloskar Brothers against the interests of minority shareholders.
In
its order, the NCLT bench of justice VG Bisht (retd) and Prabhat Kumar says, "We are of considered view that in alignment with the spirit of the deed of family settlement (DFS), which acknowledges the control and management of Kirloskar Brothers to be vested in Sanjay Kirloskar, the shares to be sold by the petitioners shall first be offered to Sanjay Kirloskar and his nominees and in case they do not offer to buy those shares within 30 days of such offer under a binding arrangement, the petitioners shall be free to sell those shares to other persons through either off market or on market transactions.
"We note that since this transfer will be a transfer inter se amongst promoters, the same should not attract the provisions of the Substantial Acquisition of Shares and Takeovers Regulations, 2011 pertaining to open offer. Further, during the arguments before this Tribunal, it was submitted that if such a buy or sell is considered, a control premium will be required to be paid by the purchasing party. However, considering that the petitioners' shareholding in Kirloskar Brothers is 24.93% and they do not exercise control over the Company, therefore, no separate control premium is required to be paid," the bench says.
NCLT also stated that it cannot be said that the affairs of Kirloskar Brothers, being a listed public company, are being conducted in a completely transparent and independent manner. "The affairs of Kirloskar Brothers are definitely influenced and coloured by the aspirations of Sanjay Kirloskar and his family members in running the affairs of Kirloskar Brothers as per their desires and without any interference as well as their interpretation of DFS and applicability to Kirloskar Brothers. This naturally has impacted the decisions of the board of directors of Kirloskar Brothers, its compliance officer and its participation in the legal proceedings."
The spokesperson of Kirloskar Industries says, "These findings reinforce the allegations of the petitioners regarding mismanagement of KBL and confirm the lack of independence of the board of directors of KBL. This also once again raises questions on the huge legal expenses being incurred by KBL to fight the personal battles of its CMD Sanjay Kirloskar."
"Unsurprisingly, one of the allegations by a contending party is that a publicly listed entity, Kirloskar Brothers Ltd, has funded the legal expenses of Rs274 crore over the past seven years for one of the battling families!" he wrote.
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