In a significant development in the ongoing Kirloskar Group dispute, the Securities and Exchange Board of India (SEBI) has taken a firm stance by filing an affidavit in the Bombay High Court. The market regulator is demanding the disclosure of a 2009 family agreement that divided Kirloskar Group companies among three key family members: Sanjay Kirloskar, Atul Kirloskar, and Rahul Kirloskar.

SEBI's Position

SEBI's move comes in opposition to a plea filed by four listed Kirloskar companies:

• Kirloskar Oil Engines
• Kirloskar Industries
• Kirloskar Ferrous Industries
• Kirloskar Pneumatic Company

These companies had challenged SEBI's advisory, which required the disclosure of the deed of family settlement. The regulator argues that the agreement contains crucial information that shareholders have a right to know, particularly a non-compete clause that restricts Kirloskar Oil Engines from entering businesses that compete with other Kirloskar entities.

The 2009 Family Settlement

The family agreement in question, dating back to 2009, reportedly designated specific roles and company associations for the Kirloskar family members:

• Atul Kirloskar was named as the promoter of four companies
• Rahul Kirloskar was designated as the promoter of the same four companies, plus GG Dandekar Properties
• Sanjay Kirloskar was appointed as the promoter of the flagship company, Kirloskar Brothers

Implications for Shareholders

SEBI's insistence on disclosing the family agreement underscores the regulator's commitment to transparency in corporate governance. The non-compete clause, in particular, is viewed as material information that could significantly impact shareholders' decisions and their understanding of the company's strategic direction.

The Ongoing Dispute

This latest development is part of a broader, ongoing dispute within the Kirloskar Group. The SEBI affidavit and the resistance from the listed Kirloskar companies highlight the complex nature of family-run businesses in India and the challenges they face in balancing family interests with corporate governance and regulatory compliance.

As the case unfolds in the Bombay High Court, it will be closely watched by investors, corporate governance experts, and the broader business community. The court's decision could have far-reaching implications for how family settlements in large business groups are handled in terms of disclosure and transparency.

The Kirloskar Group, with its diverse interests spanning various industries, remains a significant player in India's industrial landscape. The outcome of this legal battle could set a precedent for how similar family-run conglomerates manage their internal agreements and their obligations to shareholders and regulatory bodies.

Kirloskar Brothers Limited (KBL), a leading pump manufacturing company, has obtained an interim stay from the Andhra Pradesh High Court against recovery proceedings for alleged GST tax arrears amounting to Rs. 15.48 crore. The development comes as a significant relief for the company in its ongoing legal battle with the state tax authorities.

Background of the Case

The tax demand in question relates to an unincorporated joint venture named IVRCL-KBL-MEIL, formed by Kirloskar Brothers Limited in partnership with IVRCL Ltd. and Megha Engineering & Infrastructure Ltd. This joint venture was established for executing a project with the Water Resources Department of Andhra Pradesh.

Legal Proceedings

According to the company's disclosure to the stock exchanges, Kirloskar Brothers had filed a writ petition challenging the demand notice issued by the Assistant Commissioner, State Tax Department, Government of Andhra Pradesh. The petition sought to set aside the impugned assessment order and the accompanying demand notice.

Interim Stay Order

In a favorable turn of events for Kirloskar Brothers, the Andhra Pradesh High Court granted an interim stay against the recovery proceedings. This provides temporary relief from the tax recovery process.

Details of the Tax Demand

The GST tax arrears in question amount to Rs. 15.48 crore for the financial year 2017-18. This demand was made by the Assistant Commissioner (ST), Dwarakanagar Circle, Vishakhapatnam – 1, State Tax Department, Government of Andhra Pradesh. The tax authorities had initially given the company a 7-day window to pay the alleged arrears from the date of receipt of the notice.

Company's Response

Kirloskar Brothers has been proactive in addressing this issue, keeping its stakeholders informed through regular updates to the stock exchanges. The company's actions demonstrate its commitment to transparency and compliance with regulatory requirements.

Implications and Next Steps

While the interim stay provides temporary relief for Kirloskar Brothers, the final outcome of the case remains to be seen. The company will likely continue to pursue legal remedies to resolve the matter definitively.

This development is significant for Kirloskar Brothers and will be closely watched by industry observers and stakeholders. The case also highlights the complexities that can arise in tax matters related to joint ventures in infrastructure projects.

As the legal proceedings unfold, Kirloskar Brothers Limited will need to navigate the challenges while maintaining its operational focus and shareholder confidence. The company's ability to successfully resolve this tax dispute could have important implications for its financial position and reputation in the industry.