New Delhi, Oct 22:
Kirloskar Industries Ltd has sought convening of an extraordinary general meeting of shareholders of Kirloskar Brothers Ltd seeking a forensic audit of the affairs of the latter by an external agency as the feud between Kirloskar siblings simmers.
In a regulatory filing, Kirloskar Industries Ltd (KIL), which holds 23.91 per cent stake in Kirloskar Brothers Ltd (KBL), said its board at a meeting held on October 21, 2022 accorded approval to requisition the convening of an Extraordinary General Meeting (EGM) of KBL.
“The said EGM has been requisitioned along with Atul Kirloskar and Rahul Kirloskar as corequisitioners in light of the statements made by KBL released in recent news articles, whereby KBL has confirmed to expending approximately Rs 274 crore for legal, professional fees and consultancy charges…,” the filing said.
Out of the total amount spent, it added, “KBL has clarified that it has incurred around Rs 70 crore as legal expenses over the last seven years.”
Rahul and Atul Kirloskar hold around 0.5 per cent stake each in KBL.
KBL is led by Sanjay Kirloskar as chairman and managing director. The brothers, with Rahul and Atul on one side and Sanjay on the other, have been in a feud over the deed of family settlement for the assets of the more than 130-year-old Kirloskar group since 2016.
On October 15, after being cleared of insider trading charges by the Securities Appellate Tribunal (SAT), Rahul and Atul had raised questions over corporate governance of KBL.
They were accused of insider trading when they sold shares of KBL to KIL back in 2010.
They had demanded that being a listed entity, KBL should justify the rationale and basis on which it has been spending huge amounts, aggregating to approximately Rs 274 crore, towards payment of professional legal expenses and consultancy charges ever since their dispute arose in 2016.
In its rebuttal, KBL had said the legal fees over the last seven years were approximately Rs 70 crore, while a “major portion of the said Rs 274 crore is professional fees paid to various Indian and overseas reputed consultants to improve the company’s business”.
KIL, in its filing, said KBL’s “admissions along with certain recent orders passed against” it raise certain serious and important questions in relation to the conduct of affairs of the KBL board especially of the independence of the independent directors, decision-making process pertaining to initiation of legal proceedings by KBL and expending huge legal expenses towards initiating such legal proceedings.
At the EGM, KIL demanded that “an independent and reputed external entity be appointed as a forensic auditor to conduct a forensic audit in the affairs of KBL for investigation and verification of all records, books of accounts, minutes books, other documents of KBL and conduct of the board of directors of KBL including independent director…”
The company further said the audit must look into the conduct of the KBL board, especially the independent directors, on whether it has “verified the claims made by Sanjay Kirloskar in relation to the Deed of Family Settlement (DFS), in order to ensure that they have not been misled by the claims made” by the latter.
The audit must also find out whether the KBL board, including independent directors, have sought any independent legal advice pertaining to the same, especially in view of the pending personal disputes amongst the promoter family.
KIL also demanded that the audit must find out “what steps have been taken by KBL to actually bind KBL with the DFS in accordance with the provisions of applicable law” as Sanjay has been “repeatedly claiming that KBL has taken the DFS on record”.
The company further sought to know if “the independent directors acted and approved filing of cases by KBL solely on the basis of claims made by Sanjay Kirloskar without actually verifying the locus or the benefit to KBL for initiating these cases?” and if they were aware of KBL funding cases/litigations by third parties.
In the regulatory filing, KIL said the EGM should take up the resolution for “the forensic auditor to submit its report in writing directly to the shareholders of KBL while ensuring that the same is not tampered with, within a period of 60 days from the date of the EGM.” (PTI)
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