The National Company Law Tribunal (NCLT), Mumbai on Tuesday allowed Kirloskar Industries (KIL) – a company promoted by Atul Kirloskar and Rahul Kirloskar - to sell a part of their shares in Kirloskar Brothers (KBL), a company promoted by Sanjay Kirloskar.
The tribunal also came down heavily on both sections of family for the stalemate and expressed concerns over the impact of such family feud on thousands of public investors. The tribunal also pulled up Kirloskar Brothers for taking the side of Sanjay Kirloskar. Both sides of the family have been locked in a series of legal cases.
In the current case, KIL had alleged that KBL had rejected the permission it sought to sell a part of the stake it owned in the company. According to shareholding pattern, KIL owns 24 percent in KBL. The family settlement deed between the Kirloskar Brothers mandates that KIL would need a pre-approval from KBL. In its 73-page order, NCLT ruled KIL will make the first offer of sale of these shares to KBL and if KBL doesn’t respond to the offer within 30 days then KIL will be free to sell these shares to third parties.
Sanjay Kirloskar is currently managing director of KBL and is currently in dispute with the other side of the family involving Atul Kirloskar and Rahul Kirloskar.
“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.” Said KIL in a press release issued on Thursday.
The tribunal also observed if KBL buys out the shares being offered KIL, such a transfer would also have no major implications from control point of view since both the entities are part of the promoter group and hence such transfer would be considered inter-se transfer which will not trigger open offer requirements under the Takeover Code.
The tribunal also made some critical remarks on how the family fight was impacting minority investors.
“As the Respondent No. 1(KBL) company is in business for the past over 100 years with a large number of employees and shareholders, it would not be in the interest of the said company or the shareholders to wind up the company. However, the parties before us have developed such animosity between them that it will be impracticable and impossible for them to co-exist in Respondent No. 1 company as shareholders," the NCLT observed.
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