Ahead of the extraordinary general meeting (EGM) on December 8, Kirloskar Industries (KIL), a key investor, has accused the Kirloskar Brothers’ (KBL’s) board, including its independent directors, of acting against the letter and spirit of corporate governance. KIL on Monday hit out at the KBL board for recommending shareholders to vote against a resolution demanding a forensic audit of the affairs of the company by an external agency.
While convening the EGM, the KBL board had said it would not recommend the proposed resolutions to be passed at its upcoming EGM. KBL said the requisition was an attempt by Rahul Kirloskar and Atul Kirloskar to continue to breach the family settlement and engage in competing businesses and stifle proceedings, which were sub judice, and pre-empt these proceedings from reaching their logical conclusion.
KIL, a Kirloskar Group company controlled and managed by Atul and Rahul Kirloskar, had requisitioned the EGM of KBL. KIL has a 23.91% stake in KBL and is the single-largest shareholder of KBL. Atul Kirloskar, Rahul Kirloskar and KIL are co-requisitioners of the EGM to discuss the legal expenses incurred by KBL and the Deed of Family Settlement (DFS) between the promoters.
Mahesh Chabbria, KIL’s MD, said as a measure of good corporate governance, every public listed company should be in a position to offer itself to scrutiny by an auditor. “The KBL board’s conduct was not transparent and raised serious concerns about discharge of fiduciary responsibilities and upholding governance standards,” the company said. KIL wanted the KBL board to be accountable to all stakeholders.
The KBL board has interpreted the DFS and it ought to have refrained from getting so deeply involved and prejudging the issues that are already sub judice. “We do not intend to toe their line,” Chabbria said.
Sanjay Kirloskar has filed a case claiming a breach of the said DFS with petitions pending before the Supreme Court. Her has maintained that the DFS was binding on public listed companies. KIL’s view was that the companies were neither signatories nor did they adopt or ratify the DFS.
KBL, on its part, has pointed out that Atul, Rahul and listed entities controlled by them sold `250 crore worth of shares under the family deed but “breached” the non-compete clause. In a statement issued to the BSE about the EGM, the company said the DFS was implemented by the signatories to the DFS, including Rahul and Atul and companies under their control, including KIL.
As part of the implementation of the DFS, Atul and Rahul Kirloskar had sold equity shares held by them in Toyota Kirloskar Motors and other Toyota-related joint venture companies to Kirloskar Systems, a private company under the ownership, management and control of Vikram Kirloskar.
KBL blames Atul and Rahul Kirloskar for all the legal expenses saying this was primarily due to litigation triggered by them and their controlled businesses, and investigations about their insider trading in KBL shares.