Kirloskar Industries Achieved Major Victory in Legal Battle Against Kirloskar Brothers

In a significant development, Kirloskar Industries Limited (KIL) has emerged victorious in a legal battle against Kirloskar Brothers Limited (KBL). The National Company Law Tribunal (NCLT) issued a landmark order on May 21, 2024, upholding KIL’s claims of mismanagement and lack of transparency within KBL.

Tribunal Findings

• Mismanagement and Lack of Transparency: The NCLT confirmed KIL’s allegations, holding that KBL’s affairs were mismanaged and not conducted in a transparent or independent manner.
• Undue Influence: The Tribunal determined that KBL’s operations were unduly influenced by the aspirations of Mr Sanjay Kirloskar and his family, impacting board decisions and legal proceedings.
• Partisan Conduct: The NCLT observed KBL’s deviation from the neutrality expected of a public company, with its actions appearing to wholeheartedly defend Mr Sanjay Kirloskar.

Deed of Family Settlement (DFS) Deemed Irrelevant

• Improper Recording: The NCLT has raised questions on the timing and manner of recording the DFS by KBL’s board, suggesting potential manipulation to benefit Mr Sanjay Kirloskar’s control claims.
• Inoperative Restrictions: The Tribunal ruled that Section 58(2) of the Companies Act was inapplicable to KBL shares, rendering the DFS restrictions on transferability unenforceable.
• No Exclusive Ownership: The NCLT categorically denied Mr Sanjay Kirloskar and his family’s claims of exclusive ownership over KBL, finding no such clause within the DFS.

Misconduct by the Compliance Officer and Board

The NCLT highlighted instances of mismanagement, including arbitrary actions by the compliance officer and the board, potentially influenced by the private DFS instead of established codes of conduct.

• Wealth Equalisation Principle Upheld: The Tribunal acknowledged the DFS’s wealth equalisation objective and refuted arguments that KIL’s shares are valueless. The NCLT emphasised the monetisation rights associated with these shares.
• Legal Expenses Scrutinised: The NCLT’s findings raise renewed concerns regarding KBL’s substantial legal expenses incurred, potentially used to fight Mr Sanjay Kirloskar’s personal battles.

This NCLT order significantly bolsters KIL’s position in the ongoing dispute. It reinforces accusations of mismanagement within KBL and raises questions about the board’s independence. The ruling also paves the way for KIL to potentially monetise their shares in KBL.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.