7 members of Kirloskar family barred from trading for up to six months

The Securities and Exchange Board of India (Sebi) has penalised seven members of the Kirloskar family and barred them from trading on stock markets for up to six months. The Sebi action against the family is related to insider trading.

Atul Kirloskar, promoter of Kirloskar Industries; his wife Arti Atul Kirloskar; Rahul Kirloskar and his wife Alpana R Kirloskar wife; and, Jyotsna Kulkarni, wife of promoter Gautam Kulkarni, are the family members.

In an order, Sebi also disgorged Rs 31 crore, with 4 percent interest rate, from them – for 45 days from October 6, 2010. Sebi’s investigation period was from March 1, 2010, to April 30, 2011.

Disgorgement is the legally mandated repayment of ill-gotten gains imposed on wrongdoers. Funds that were received through illegal or unethical business transactions are disgorged, or order to be paid back, often with interest and/or penalties to those affected by the action.

Sebi has passed the order under Sections 11(1), 11(4), 11B(1), 11B(2) and 11(4A), read with Section 19 of the Securities and Exchange Board of India Act, 1992.

Investigations have revealed that the promoters and directors of Kirloskar Brothers (KBL) had traded in the scrip of KBL while in possession of unpublished price- sensitive information (UPSI) and avoided losses.

They submitted incorrect undertakings/ declarations to KBL, and committed fraud on Kirloskar Industries (KIL) and its public shareholders.

Sebi also found  instances of incorrect declaration on the part of Sanjay Kirloskar, who heads Kirloskar Brothers (KBL), his wife Pratima Kirloskar and Karad Investments. They have been fined a total of Rs 42.77 lakh. They have also been banned by the SEBI, for three months, from selling or buying shares.

This was for a transaction done in KBL in 2010.

Responding to the SEBI order, Atul and Rahul said:

"Atul Kirloskar and Rahul Kirloskar reject any suggestion of wrongdoing and maintain that the share sale reflected all appropriate stock exchange disclosures and necessary regulatory pre-clearances at the time. We are currently reviewing SEBI’s order and seeking appropriate legal advice. We remain confident of our position and plan to appeal the ruling shortly."

Background

While the SEBI order may have closed one chapter in the fight between the Kirloskar brothers, unless one of the factions decide to challenge it, the siblings continue to slog it out on other fronts.

As Moneycontrol had earlier reported, the genesis of the fight is a deed of family settlement that the brothers had signed in 2009, to divide responsibilities and ownership of the group companies.

Apart from the SEBI case, the two factions are also warring over the family's Pune property. Moreover, Atul and Rahul have dragged Sanjay to the National Company Law Tribunal, alleging mismanagement at KBL. That fight saw Kishor Chaukar being voted out from the company board, by shareholders.

The brothers are also contending over the use of family trademark.

Sebi had received various complaints of insider trading and bad corporate governance practices against KBL. Subsequently, Sebi conducted an investigation.

The investigations were conducted to ascertain possible violation of the provisions of Sebi Act, 1992, Sebi (Prohibition Insider Trading) Regulations, 1992, and Sebi (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003.