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Sanjay Kirloskar-led Kirloskar Brothers Limited (KBL) has put out a notice on the exchanges, calling for an extraordinary general meeting (EGM) by requisition of Atul Kirloskar-controlled Kirloskar Industries Limited (KIL).
KBL sent a notice to Bombay Stock Exchange announcing that the requested EGM will be held on December 8, 2022. It also attached a “Statement of material facts as required under Section 102 of the Companies Act, 2013”.
The key points of KBL’s notice include the statement that Atul and Rahul Kirloskar and their controlled listed entities sold ₹250 crore worth shares of listed entity under family deed but “breached” the non-compete clause.
Legal expenses of KBL are primarily due to litigation triggered by Atul/ Rahul Kirloskar and their controlled businesses and investigations into their insider trading in KBL shares. Atul and Rahul Kirloskar or their controlled entities have not voted against any of the resolutions for adoption of the audited balance sheet and profit-and-loss account of KBL till date, including legal expenses, the KBL notice stated.
It added that the bulk of expenses towards legal and consultancy charges (about ₹274 crore) have been paid to consultants including BCG, KPMG and Roland Berger, in relation to the company’s growth and business. The legal fees over the last seven years aggregated to approximately ₹70 crore and included legal expenses relating to tax matters, labour matters, arbitrations, international projects, property documents, which are matters unconnected with the litigations ongoing with the requisitionists, the notice added.
The dispute
The Kirloskar siblings have been in disagreement over several matters related to the ‘deed for family settlement’ (DFS) entered on September 11, 2009, which covers them and the companies under their control. The matters are being heard in various courts across Pune, Mumbai High Court and the Supreme Court.
KIL is one of the largest shareholders of KBL, holding 23.91 per cent of KBL’s voting capital. It had sent a requisition on October 21, 2022, for convening an EGM of the shareholders of the company.
KIL has demanded an EGM for conducting an external forensic audit to investigate the legal expenses aggregating to ₹274 crore and questioning if that was Sanjay Kirloskar’s personal expense. The other matters raised include whether the KBL board sought any independent legal advice pertaining to the DFS in view of the pending personal disputes among the promoter family.
Atul and Rahul Kirloskar had demanded in October that, being a listed company, KBL should justify the rationale behind spending nearly ₹274 crore towards professional and legal expenses for Sanjay Kirloskar. They raised questions over the corporate governance of KBL following the Securities Appellate Tribunal’sdecision to set aside the insider trading order passed against them by the then whole time member, Madhabi Puri Buch of SEBI.
SAT had passed the order on the grounds that there was no unpublished price-sensitive information (UPSI) and, consequently, there was no insider trading by Rahul and Atul Kirloskar when they had sold shares of KBL to KIL in 2010.
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