Kirloskar family feud escalates as SEBI directive faces challenge at SAT

KOEL appeals to SEBI’s disclosure mandate for the 2009 family settlement agreement.

The longstanding feud among members of the Kirloskar family is set to reach a critical juncture on January 16, 2025, at the Securities Appellate Tribunal (SAT). At the centre of the dispute is a Securities and Exchange Board of India (SEBI) directive requiring Kirloskar Oil Engines Limited (KOEL) to disclose a 2009 Deed of Family Settlement (DFS). The case underscores the tension between corporate governance and familial agreements within promoter-driven businesses.

Key Points in the Kirloskar Dispute

1. The Deed of Family Settlement (DFS): A Framework for Harmony
The DFS, signed in 2009, was intended to allocate business ownership and responsibilities among the Kirloskar family members. Key allocations included:

• KOEL: KOEL: In line with the family settlement KOEL sold Toyota JV shares worth Rs 250 crore to Vikram Kirloskar and his nominees, aligning with the settlement’s terms.
• Kirloskar Brothers Limited (KBL): Sanjay Kirloskar, Chairman of KBL also sold his stake and transferred funds in line with the family deed.

2. Alleged Violations and Mounting Tensions

• KBL’s Allegations
  • Accusation: KOEL’s acquisition of La Gajjar Machineries in 2017 directly competes with KBL’s pump business, violating the DFS.
  • Action: KBL escalated the issue to the Supreme Court, where the matter remains unresolved.
     
• SEBI’s Directive
  • Rationale: SEBI argued that the DFS has material implications for shareholders under Listing Obligations and Disclosure Requirements (LODR).
  • Emphasis: Non-disclosure creates “information asymmetry” and erodes regulatory certainty.

3. KOEL’s Defense and Appeal to SAT

• KOEL’s Standpoint
  • The DFS is a private family agreement and irrelevant to listed entity obligations.
  • SEBI’s directive was dismissed as an “ignorant interpretation” of laws.
     
• Appeal
  • Filed with SAT on January 4, 2025.
  • Hearing is scheduled for tomorrow January 16, 2025.

Broader Implications

1. Impact on Corporate Governance
The outcome could redefine the enforcement of disclosure norms, especially among family-run businesses. A ruling in favour of SEBI may:

• Strengthen transparency requirements.
• Set a precedent for promoter-driven companies to disclose private agreements with material business implications.
  
   

2. Investor Confidence at Stake
A decision favouring SEBI could enhance investor trust by ensuring greater accountability in governance practices.

Conclusion
As the Kirloskar family feud heads to SAT, the stakes are high - not just for the warring parties but also for India’s corporate governance landscape. SEBI’s push for transparency aims to bridge the gap between private agreements and public accountability. The SAT verdict could serve as a turning point, reinforcing the need for robust disclosure norms while influencing how family-led businesses balance legacy agreements with regulatory requirements.

Disclaimer: The article is for informational purposes only and not investment advice.