Kirloskar promoters, others fined Rs 15 crore; barred from trading for up to 6 months

Mumbai: Market regulator Securities and Exchange Board of India (SEBI) has imposed a hefty penalty of nearly Rs 15 crore on Kirloskar Industries, certain promoters of Kirloskar Group including Atul Kirloskar, Rahul Kirloskar and five others for violating securities laws. The promoters will also have to disgorge Rs 16.6 crore of gains in insider trading, in addition to the penalty.

The case pertains to selling shares of Kirloskar Brothers (KBL) by these entities to another listed company Kirloskar Industries (KIL) in 2010, ahead of the financial results. Rahul, Atul Kirloskar and five others, have also been barred from buying, selling or dealing in shares for six months.

In three separate orders, Sebi has slapped a penalty Rs 14.6 crore on promoters Atul, Rahul, Alpana and Aarti Kirloskar, Jyotsna Gautam Kulkarni, Nihal Gautam Kulkarni and two officials A R Sathe, A N Alawani. KIL will have to pay a penalty of Rs 5 lakhs while Sanjay Kirloskar and his wife will have to pay Rs 42.7 lakh.

SEBI has charged these promoters under Sebi (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) regulations, 2003.

On October 06, 2010, some top officials and few members of the promoter group — Gautam Kulkarni, Rahul Kirloskar, Atul Kirloskar, Alpana Kirloskar, Jyotsna Kulkarni and Arti Kirloskar — sold 1.07 crore shares of KBL, representing 13.51 per cent of the total paid-up capital of the company to Kirloskar Industries at Rs 256 per share. The total value of this transaction was roughly Rs 275 crore.

It was found that the faction of the promoter group individuals were in possession of detailed financial statements of the company and such price sensitive information were circulated every month to the group of promoters by the finance department of KBL and the same was collectively discussed in the board meetings.

These shares, according to Sebi, were sold when unpublished price sensitive information about financial results of Kirloskar Brothers were not in the public domain. Shares of KBL more than halved within six months of this transaction by the promoters.

While A R Sathe and Nihal Gautam Kulkarni have also been barred from buying, selling or dealing in shares for three months, the rest of the accused are barred for six months.

In a separate order, Sebi has also imposed a penalty of Rs 5 lakhs on KIL in a fraud case.

In case of failure to pay the disgorgement amount within 45 days, an interest at the rate of 12 per cent per annum shall be applicable for the period, starting from the end of 45 days from the date of service of this order till the date of payment, said the Sebi order.

A spokesperson for the Kirloskar family said they are currently reviewing SEBI’s order and seeking appropriate legal advice.

“Mr Atul Kirloskar and Mr 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 remain confident of our position and plan to appeal the ruling shortly,” he added.