Kirloskar feud: Sebi tells Bombay HC disclosures don’t impose liabilities on listed firms

Corporate disclosures made under the market regulator’s rules will not directly create any legal obligation or liabilities for listed firms, the Securities and Exchange Board of India informed the Bombay High Court responding to petitions by Kirloskar group companies.

These companies have challenged the constitutional validity of Regulation 30A of the Sebi (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Under this, disclosure of private agreements by promoters, directors, and other stakeholders are required even if an entity is not a direct party if such agreements can impact a company’s management, control, or impose any restriction or liability.

“Though listed entities, under (“SEBI LODR Regulations”), are required to disclose certain agreements as set out therein, the mere disclosure of any agreement by a listed entity, shall not, by itself mean that the company admits such agreement as binding on itself or as having an impact on its management or control, or imposing any restriction or creating any liability upon itself,” Birendra Saraf, the Advocate General representing Sebi, told the court.

However, such disclosures do not have the effect of diluting either the legal requirements under the Sebi (LODR) nor their order passed in earlier hearings, the Advocate General added.

The Kirloskar family is feuding over a 2009 ‘Deed of Family Settlement’ (DFS), a private arrangement that outlined the distribution of control, management, and ownership across various Kirloskar companies among family branches.

Sanjay Kirloskar-ledKirloskar Brothers Ltd has demanded thatKirloskar Oil Engines Ltd (KOEL) and other group companies disclose the DFS under Regulation 30A. KOEL, however, argues it was not a signatory to the DFS and cannot be forced to make such disclosures.

‘Much needed clarity’

In December, Sebi directed KOEL to disclose the DFS, saying the agreement “continues to remain in force and indirectly places restrictions” on the company.

“The outcome provides much needed clarity that listed companies cannot be forced into obligations arising from agreements they never entered into, signed, or ratified,” a spokesperson for KOEL said following Sebi’s submission before the Bombay High Court on Tuesday.

The other companies involved in the Kirloskar family dispute areKirloskar Ferrous Industries Ltd,Kirloskar Pneumatic Co. Ltd,Kirloskar Industries Ltd, and GG Dandekar Properties Ltd.

A Bombay High Court bench led by Justices Iqbal Chagla and Farhan Dubash allowed the Kirloskar group companies to withdraw their petition. A detailed order is, however, awaited in the matter.

“We accept both Sebi and the petitioner’s statement on record. We make it clear we haven’t gone into the merits of the matter. The proceedings before SAT (Securities Appellate Tribunal) will be decided on merits. The statement should not dilute the essence of Sebi directions including inter-se disputes between the parties (members of Kirloskar family),” the Bombay High Court said.

The Kirloskar group companies have contended that Sebi’s disclosure rules are “arbitrary”, “excessive”, and applied “retrospectively without justification”.

They argued in their petition that the regulator had gone beyond its authority by forcing listed entities to treat third-party agreements—even those not signed or approved by them—as binding and significant.