The Supreme Court on Monday sought the response from the Securities and Exchange Board of India (Sebi) on an appeal filed by Sanjay Kirloskar-led Kirloskar Brothers (KBL) alleging that Kirloskar Oil and Engines (KOEL) had failed to comply with the listing regulations. While Kirloskar Brothers is majority owned by Sanjay Kirloskar, KOEL is controlled by younger brothers Vikram, Atul and Rahul Kirloskar.
A Bench led by Justice Surya Kant asked the counsel of Kirloskar Brothers to serve the copy of its appeal to Sebi.
Citing Sebi (Listing Obligations and Disclosure Requirements) Regulations, 2015 that came into force from September 2015, Kirloskar Brothers told the SC that under Regulation 30(2), a family settlement agreement was deemed to be a material event and a listed entity was mandatorily required to make a disclosure of such an event.
On September 11, 2009, a deed of family settlement (DFS) was entered into between Kirloskar Brothers chairman and managing director Sanjay Kirloskar and KOEL promoters Vikram, Atul, Rahul and late Gautam Kulkarni, former executive vice- chairman of KOEL, giving the ownership, management and control of each branch of the Kirloskar family business to the parties specified in Schedule II of the settlement. The DFS was amended in October 2009 after some share sale between the signatories.
Stating that the SAT had erred in its finding that Sebi LODR cannot apply retrospectively, senior counsel AM Singhvi, along with counsel Ujjwal Rana, argued that there was no mandate in the Sebi LODR that only family settlement agreements entered into on or after the regulations came in force require to be disclosed. The DFS should have been mandatorily disclosed by KOEL and no person in control of the company can be excused from making a disclosure of the DFS, they added.
“The real intention behind the non-disclosure of the DFS by KOEL and its board seems to be to continue to conceal the contents of DFS, which inter alia contains material clauses relating to ownership, management and control of KOEL and other entites, and non-compete obligations, from the stock exchange and the public,” the appeal said.
Kirloskar Brothers has sought a direction to Sebi to intervene in the interests of investors and the public and direct KOEL to forthwith disclose the DFS to the stock exchanges and initiate further investigations and take consequential actions against its directors for violations of the Sebi regulations, including LODR.
Kirloskar Brothers alleged that KOEL did not disclose the deed of family settlement to the stock exchange with a view to intentionally conceal the true position to the investors, thereby violating Regulation 30 of the LODR Regulations. It had also filed a complaint requesting Sebi to take appropriate action against KOEL. However, Sebi had earlier communicated that DFS came into existence in 2009 and Regulation 30 of its LODR Regulations came into existence only in 2015 and is prospective in nature, thus there was no requirement of any disclosure.
Besides, KOEL was not a party to the DFS which is a private agreement entered into between the Kirloskar family members in their individual capacities, Sebi had told Kirloskar Brothers.
Since no action was taken by Sebi, Sanjay Kirloskar-led firm had moved the SAT which had last year on February 17 rejected its complaint against KOEL and its board of directors.