SEBI Charges Kirloskar Promoters over Securities Norm Violation

The Securities and Exchange Board of India (SEBI) has charged the Kirloskar brother- Atul, Rahul, and Sanjay and their family members are alleged with violation of regulations. Moreover, SEBI has barred Rahul and Atul Kirloskar from the securities market for six months.

Presently, Sanjay is heading Kirloskar Brothers (KBL), While Rahul and Atul are operating Kirloskar Industries. However, Rahul and Atul are at odds with their brother Sanjay Kirloskar.

The regulation has sent three separate orders, it has asked more than a dozen entities and individuals belonging to both factions to pay over Rs.31 crore in penalties and disgorgement. Alongside this, the Rahul and Atul camp has been asked to pay up Rs.28 crore along with the interest of four percent per annum for 10 years. On the other hand, the Sanjay camp has been asked to pay just Rs.47 lakh in penalties and disgorgement.

The case heads back to 2010 when Kirloskar Industries were forced to purchase shares of KBL. Additionally, certain family members had sold KBL shares while in possession of unpublished price sensitive information and have violated insider trading rules.

Therefore, SEBI launched an investigation post it receiving the complaint on an alleged violation of insider trading and bad corporate governance practices at KBL. However, in December 2019, SEBI had issued an initial set of show-cause notices to the promoter entities and the latter replied with supplementary notices.

“Atul and Rahul Kirloskar reject any suggestion of wrongdoing and maintain that the share sale reflected all appropriate stock exchange disclosures and necessary regulatory pre-clearance at the time. We are currently reviewing SEBI’s order and seeking appropriate legal advice. We remain confident of our position and plan to appeal the ruling shortly,” said a spokesperson belonging to the group.

SEBI’s investigation has unveiled that some promoters had submitted incorrect information to the company to obtain pre-clearance to sell KBL shares. Further, the regulation states that the committed fraud in the public shareholders of Kirloskar Industries insisted to buy KBL shares.

However, the entities that belong to the Atul and Rahul camp has argued that they had just applied for pre-clearance from the company on 28th September 2010, to conduct the trades that were to be executed on 6th October 2010. Furthermore, they also claimed that the transactions were of the nature of inter- promoter transfers thus, dint fall under insider trading. Still, these arguments failed to convince the SEBI.

Atul and Rahul Kirloskar affirmed SEBI’s action has been motivated and exclusively based on complaints from Sanjay. SEBI stated that the argument didn’t hold merit as it also took enforcement action against Sanjay.