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MUMBAI : Mumbai: The Securities and Exchange Board of India (Sebi) on Wednesday by way of three orders levied penalties on the three Kirloskar brothers for acts of fraud while dealing in the shares of Kirloskar Brothers Ltd (KBL) in 2010. Kirloskar Industries Ltd on the other has been charged for non-compliance with listing regulations.

While KIL is controlled by younger brothers Atul and Rahul Kirloskar, Kirloskar Brothers is majority owned by Sanjay Kirloskar.

KIL is facing a penalty of 5 lakh, Atul and Rahul along with 6 others have to disgorge of 16.6 crore of illgotten gains in addition to a penalty of 14.6 crore, Sanjay Kirloskar and his wife total liability due to illgotten gains and penalty is 42.7 lakh

Mint had first reported on 12 August that Sebi has found the promoters of KBL in-violation of prevention of fraudulent and unfair trade practices (PFUTP) through a showcause notice.

The matter pertains to a decade-old case of the promoter group selling a 13.5% stake in KBL to KIL, which harmed the interests of minority investors.

The promoter group of KBL on 6 October 2010 sold 10.72 million shares of KBL worth 275 crore in the company to Kirloskar Industries. The financial position of KBL as of September 2010 had deteriorated on all aspects.

The promoters including Gautam Kulkarni, Rahul Kirloskar, Atul Kirloskar, Alpana Kirloskar, Jyotsna Kulkarni and Arti Kirloskar were direct beneficiaries of the said sale, Sebi noted. The directors of KIL have on other hand have been 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 resulting in fraud, said Sebi in the order.

Sebi held that few directors of KIL had induced KIL to buy shares from the promoter group and thereby them in selling the shares of KBL to KIL at a time disadvantageous to KIL and its minority shareholders.

Thus, directors and promoters had caused unfair treatment to the minority shareholders of KIL in a fraudulent manner and violated the provisions, said Sebi.

Sanjay Kirloskar and his wife on the other hand faced charges of insider trading when they sold KBL shares 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 Rs. 67.47 crore was made public in April 2011.

The shares were sold to Prakar Investments Private Limited where Sanjay Kirloskar and his wife Pratima Kirloskar are the owners with Sanjay being the Chairman and Managing Director.

Spokesperson for KIL and KBL did not offer any comments immediately.

The three brothers have been embroiled in a legal battle since 2018. Atul and Rahul have filed a company petition alleging mismanagement at KBL when it did not allow the two to increase stake in the company.

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