NCLT Order Confirms Mismanagement Allegations Against Kirloskar Brothers

In a significant development, Kirloskar Industries Ltd (KIL) announced on Thursday that the National Company Law Tribunal (NCLT) has passed an order which supports the allegations of mismanagement within Kirloskar Brothers Ltd (KBL). This decision highlights concerns regarding the independence of KBL's board of directors. KIL, alongside Atul Kirloskar and Rahul Kirloskar, who collectively own a 24.92% stake in KBL, have been embroiled in a dispute with KBL's Chairman and Managing Director Sanjay Kirloskar, stemming from familial discord.

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The NCLT's ruling on May 21, 2024, found that KBL's operations were not being conducted transparently or independently. A spokesperson for KIL stated that the tribunal confirmed allegations of oppression and mismanagement under Sections 241 and 242 of the Companies Act against KBL, its board, and Pratima Kirloskar, Sanjay Kirloskar's wife. The tribunal observed that KBL's affairs were heavily influenced by Sanjay Kirloskar and his family, affecting the company's governance and legal engagements.

This judgment raises critical questions about the substantial legal costs incurred by KBL to address personal disputes of its Chairman and Managing Director. Attempts to reach KBL for comments were unsuccessful. Furthermore, the tribunal dismissed claims by Sanjay Kirloskar and his family regarding exclusive ownership and control over KBL based on the Deed of Family Settlement (DFS). It clarified that no clause in the DFS granted exclusive ownership to any party.

The NCLT noted that shares were allocated among Kirloskar family members to balance wealth distribution, which the petitioners are free to monetize as desired. It also rejected the notion that the DFS implied restrictions on share transactions, emphasizing that the DFS is a comprehensive agreement with legally mandated clauses.

The feud between Sanjay Kirloskar and his siblings Atul and Rahul has been ongoing since 2016, revolving around the family settlement deed concerning the assets of the over 130-year-old Kirloskar group. Rahul Kirloskar serves as the executive chairman of Kirloskar Pneumatic Co Ltd, while Atul Kirloskar holds the position of executive chairman at Kirloskar Oil Engines Ltd.