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Home >Companies >News >Sebi penalises some Kirloskar promoters for fraud

The stock market regulator on Wednesday penalized Kirloskar Industries Ltd (KIL) and six individual promoters of two Kirloskar companies, and barred two Kirloskar brothers from the stock market for six months, over various charges related to a share transaction in Kirloskar Brothers Ltd (KBL) in 2010.

In a set of three orders, the Securities and Exchange Board of India (Sebi) imposed a penalty of 14.6 crore on nine individuals—six promoters Atul Kirloskar, Rahul Kirloskar, Gautam Kulkarni (deceased), Jyotsna Kulkarni, Arti Kirloskar and Alpana Kirloskar and three directors—and asked them to disgorge, or pay back 16.6 crore of ill-gotten gains with interest. KIL is facing a penalty of 5 lakh, while Sanjay Kirloskar and his wife must disgorge and pay a penalty totalling 42.7 lakh.

While Sebi charged KIL for non-compliance with listing regulations, brothers Atul and Rahul were charged for acts of fraud while dealing in KBL shares. It also barred them from the stock market for six months.

The Sebi order pertains to irregularities related to a 6 October 2010 transaction, in which the promoter group of KBL sold 13.5% stake in KBL worth 275 crore to KIL. While KIL is controlled by younger brothers Atul and Rahul, KBL is majority owned by elder brother Sanjay.

Mint had first reported on 12 August about Sebi issuing a showcase notice to the promoters of KBL under the prevention of fraudulent and unfair trade practices (PFUTP).

KIL’s promoters Gautam Kulkarni, Rahul Kirloskar, Atul Kirloskar, Alpana Kirloskar, Jyotsna Kulkarni and Arti Kirloskar were direct beneficiaries of the 2010 share sale, Sebi noted. The three directors of KIL were charged with failure in discharging their duty to act in good faith and with due diligence in the performance of their duties in the interest of KIL, the Sebi order said, thus causing unfair treatment to KIL’s minority shareholders.

Sanjay and his wife have been penalised for incorrect declaration and selling personal shares in KBL in violation of norms of prevention of insider trading, on 10 October 2010, ahead of the information regarding capital loss of the investment/advances given to subsidiary Kirloskar Construction and Engineers Ltd through writing off the loan/advances to the tune of 67.47 crore was made public in April 2011. The shares were sold to Prakar Investments Pvt. Ltd, where Sanjay and wife Pratima Kirloskar are owners, with Sanjay being the chairman and MD.

“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 KIL spokesperson.

A spokesperson for KBL did not respond to requests for comment.

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