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Informist, Tuesday, Dec. 31, 2024

 

NEW DELHI – The Securities and Exchange Board of India on Monday asked Kirloskar Oil Engines Ltd. to adhere to the listing regulations and disclose to the exchanges the Sept. 11, 2009 deed of settlement entered into amongst the members of the Kirloskar family. The company, however, said in a filing on Tuesday that it is not required to disclose the deed of family settlement under SEBI's listing regulations.

 

SEBI sent a letter to the company in compliance with a Securities Appellate Tribunal order dated Oct. 21, directing the regulator to record the rule on submissions in the matter of Kirloskar Oil Engines, Kirloskar Industries Ltd., Kirloskar Ferrous Industries Ltd., Kirloskar Pneumatic Company Ltd., and G.G. Dandekar Properties Ltd.

 

The market regulator had earlier written to these companies in October advising them to disclose the deed of family settlement. Kirloskar Oil Engines and some of the other companies appealed against SEBI's letter to the tribunal, which disposed of the appeals by passing the direction to SEBI.

 

SEBI's letter on Monday to Kirloskar Oil Engines was after it heard the company. The market regulator ruled that the deed of family settlement "is subsisting in nature, indirectly creates a restriction on the listed entities managed/promoted by the parties to such DFS (deed of family settlement), warrants disclosure, regardless of whether such listed entity is a party to the agreement or not" under the listing regulations.

 

Kirloskar Oil Engines, however, said Tuesday, that it "maintains the stand that the company is not bound by the DFS nor does the DFS have any impact on it or create any restriction or liability on it." The company is likely to appeal against SEBI's letter since it said in Tuesday's filing that it is "availing legal remedies to challenge the SEBI letter by filing appropriate legal proceedings."

 

The company further said that SEBI's decision not only contained factual inaccuracies but was "in complete ignorance of inter alia settled principles of contract law, corporate laws and company law." The company said the question of whether the deed of family settlement is binding on the company has been pending before a civil court since 2018.

 

According to SEBI, the deed of family settlement was entered into and executed in 2009 to transfer ownership, management and control of different businesses among the Kirloskar family members and all the transfers under the deed were effected prior to 2015 when the new listing regulations came into force. The deed shall be considered as a subsisting agreement as on the date when the new listing regulations were notified in 2015 which requires the company affected directly or indirectly by such agreements to disclose the agreement.

 

SEBI also said in Monday's letter that a special civil suit was filed by Sanjay Kirloskar of Kirloskar Brothers in the Pune civil court seeking the specific performance of the deed. Since the court has not issued any ruling rescinding or invalidating the deed, it shows that the deed is subsisting currently and being treated as such by the parties.

 

The market regulator believes that a non-compete clause in the deed of family settlement, which restricts the parties including promoters and chairman of the listed entities, from engaging in a directly competitive business. SEBI said this means that since the promoters of the listed entities, including Kirloskar Oil Engines, "have agreed in their individual capacities to be bound by the non-compete clause, the non-compete clause in the DFS therefore indirectly imposes a restriction on the listed entity, even though the listed entity is itself not a signatory to the DFS." This was material information that had to be disclosed under the listing regulations, according to the market regulator.

 

Shares of Kirloskar Oil Engines ended Tuesday nearly 1% higher at INR 1,027.15 on the National Stock Exchange of India.  End

 

Reported by Rajesh Gajra

Edited by Saji George Titus

 

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