NCLT allows Kirloskar brothers to sell shares in Kirloskar Industries

The National Company Law Tribunal (NCLT) allowed Atul Kirloskar faction of Kirloskar Industries Ltd (KIL) to sell its shareholding in another listed entity Kirloskar Brothers Ltd (KBL) in the latest development in the protracted dispute in the Kirloskar family.

Brothers Atul and Rahul Kirloskar faction which control KIL had approached the tribunal's Mumbai bench alleging oppression of minority shareholders and mismanagement in KBL.

"We are of the considered view that in alignment with the spirit of DFS (Deed of Family Settlement), which acknowledges the control and management of respondent no. 1 (KBL) to be vested in respondent no. 2 (Sanjay Kirloskar), the shares to be sold by the petitioners (KIL) shall first be offered to respondent no. 2," observed the division bench of Justice VG Bisht and a technical member Prabhat Kumar in its order of May 21.

"...his (Sanjay Kirloskar) 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," the order said.

Currently, the Sanjay Kirloskar family owns about 40.27% of KBL whereas Atul Kirloskar and KIL collectively hold about 24.93%.

KIL and Atul Kirloskar faction alleged that pre-clearance applications filed by them to buy or sell KBL's shares have been arbitrarily rejected repeatedly, without being given any reason.

"It is pertinent to note that the shares in respondent no. 1 (KBL) company were allocated to the petitioners to equalise the wealth of the Kirloskar group amongst the family factions and such shares so received have economic value, which the petitioners are entitled to monetise in the manner they wish," observed the tribunal.

"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 Chairman and Managing Director, Mr. Sanjay Kirloskar," a spokesperson for KIL said in a statement after the NCLT ruling.

The Kirloskar family dispute has Sanjay Kirloskar on one side and others including Atul, Rahul Kirloskar, involving their companies and family properties, on the other.

The genesis of the dispute in the 130-year-old group lies in the DFS finalised in 2009. Through this, the family had agreed to distribute various assets in the form of shares of group companies and cash held in trust and investment companies among the signatories of DFS to avoid a potential dispute with family members.