On Tuesday, the National Company Law Tribunal made a significant ruling in a dispute involving the Kirloskar family and their companies. The NCLT stated that the petitioners, Atul and Rahul Kirloskar, have successfully presented their case regarding issues related to fairness and management practices within companies.
Despite being filed in 2017, legal proceedings stretched for over six years.
Kirloskar Industries Ltd., led by brothers Atul and Rahul Kirloskar, holds a significant stake in Kirloskar Brothers Ltd., primarily owned by Sanjay Kirloskar. Kirloskar Industries owns 23.91% of Kirloskar Brothers. In addition, Atul Kirloskar has a 0.59% ownership stake, while Rahul Kirloskar holds a 0.51% stake in Kirloskar Brothers.
The conflict arose in 2017 when Atul and Rahul Kirloskar filed a petition with the NCLT, alleging instances of “oppression and mismanagement” by Sanjay Kirloskar. They sought Sanjay’s removal from the company, citing actions that were detrimental to the interests of minority shareholders.
Further, Atul and Rahul Kirloskar submitted that the rejection of their pre-clearance applications for buying or selling shares of Kirloskar Brothers was based on a family settlement agreement.
They argued that the agreement aimed to distribute shares among family members for economic parity and didn’t restrict buying or selling shares. They claimed that Sanjay Kirloskar misinterpreted the Deed of Family Settlement to retain exclusive control over the company.
The petitioners highlighted that the DFS was entered into in 2009 to distribute shareholding among family members, ensuring economic parity. The agreement involved Atul and Rahul Kirloskar, Sanjay Kirloskar, and other family members, with no representation on behalf of Kirloskar companies. It aimed to distribute ownership, management, and control among family branches without restricting share transactions.
The NCLT observed various disputes regarding the interpretation of the DFS, stating that these disputes were outside the present case’s scope and were sub judice. Additionally, the tribunal noted that Kirloskar Brothers Ltd.’s affairs were influenced by Sanjay Kirloskar and his family, impacting the decisions of the company.
Considering the animosity between the parties, the NCLT suggested that for the company’s smooth functioning, either the petitioners or the respondents’ group should exit the company or the company should be divided.
In line with the DFS acknowledging Sanjay Kirloskar’s control over the Kirloskar Brothers, the NCLT ruled that the shares to be sold by the petitioners must first be offered to Sanjay Kirloskar and his nominees. If they decline within 30 days, the petitioners are free to sell to others.
