Kirloskar Brothers Ltd calls for shareholders' meet on Dec 8 to consider demand for forensic audit

Kirloskar Brothers Ltd has called for an extraordinary general meeting of its shareholders on December 8, 2022 to consider demand for forensic audit of the affairs of the company by an external agency, according to a regulatory filing.

It follows requisition by Kirloskar Industries Ltd (KIL) along with Atul Kirloskar and Rahul Kirloskar, who together hold 24.92 per cent in Kirloskar Brothers Ltd (KBL), which has, however, advised its shareholders to reject the resolution.

Amid the simmering feud between Kirloskar siblings, with KBL Chairman and Managing Director Sanjay Kirloskar on one side and Atul and Rahul on the other, the company said the EGM would take up for consideration an ordinary resolution the appointment of an independent forensic auditor to investigate affairs of the company.

In a regulatory filing, KBL said the EGM (extraordinary general meeting) ''at the requisition of Kirloskar Industries Ltd along with Atul Kirloskar and Rahul Kirloskar, collectively holding more than one-tenth of the paid-up share capital of the company'' will be held on December 8, 2022 at 2 pm via video conferencing or other audio-visual means.

The EGM will consider the resolution for appointment of an independent forensic auditor for conducting a forensic audit to investigate and verify the expenses incurred by KBL on legal, professional consultancy charges over the past six years and the affairs of the company.

The investigation would verify all records, books of accounts, minutes books, and other documents of the company.

Moreover, it would examine the conduct of the board of directors, including independent directors, the filing added.

KBL, however, said its board does not recommend the proposed resolutions to be passed as ''the requisitionists are not justified in questioning the independence the independent directors or the decisions of the board'' to initiate legal proceedings to protect the interest of the company.

It further said,''This requisition is nothing but an attempt to pave the way for ACK (Atul) and RCK (Rahul) through KOEL (Kirloskar Oil Engines Ltd) and its subsidiaries/associate companies to continue to breach the DFS (deed of family settlement) by carrying on and engaging in business competing with the business of KBL.'' KBL termed the requisition as a move to ''stifle proceedings which are sub-judice and/or pre-empt these proceedings from reaching their logical conclusion.'' The DFS signed on September 11, 2009 between members of the Kirloskar family had clearly defined ownership, management and control of different Kirloskar group companies, KBL said.

In October Kirloskar Industries Ltd (KIL) along with Atul and Rahul Kirloskar had sought convening of an extraordinary general meeting of shareholders of KBL seeking a forensic audit of the affairs of the latter by an external agency.

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 illegal expenses and consultancy charges ever since their dispute arose since on or about 2016.

After being cleared of insider trading charges labelled against them 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 accused KBL of ''mis-utilising shareholder resources of a publicly listed company and misusing regulatory machinery'' in the personal dispute of its Chairman & Managing Director Sanjay Kirloskar.

KIL had demanded that 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.

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''.

Rahul Kirloskar is the executive chairman of Kirloskar Pneumatic Co Ltd, Atul Kirloskar is the executive chairman of Kirloskar Oil Engines Ltd.

The Kirloskar brothers have been in a feud since 2016 over the deed of family settlement for the assets of the more than 130-year-old Kirloskar group.

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