Kirloskar Brothers calls EGM on Dec 8; to vote on forensic audit

Shareholders to discuss legal fees paid by company as dispute in promoter family continues

Kirloskar Brothers, a listed entity owned by Sanjay Kirloskar, has called an extraordinary general meeting (EGM) of shareholders on December 8 to discuss issues raised by Atul and Rahul, the businessman’s brothers, on the legal fees paid by the company and to vote on appointing a forensic auditor.

A company notice said the bulk of the legal and consultancy fees of about Rs 274 crore went to consultants, which included BCG, KPMG and Roland Berger, for work related to business strategies.

The legal fees for the last seven years, amounting to approximately Rs 70 crore, related to tax and labour matters, arbitration, international projects and property documents. These are matters unconnected with ongoing litigation presently ongoing with the requisitionists, the company said in filings, referring to a legal term about business meetings.

The brothers are sparring over several matters related to the Deed for Family settlement (DFS) entered on September 11, 2009 which covers them and companies under their control. The disputes over the DFS are being heard before the Mumbai High Court, the Supreme Court and a court in Pune.

Kirloskar Industries Ltd (KIL) is one of the largest shareholders of Kirloskar Brothers, holding a 23.91 per cent stake. KIL sent a notice on October 21, seeking the EGM asking for an external forensic audit to investigate the legal expenses and questioning if that was Sanjay Kirloskar’s personal expense.

KIL’s notice asked whether the Kirloskar Brothers' board sought any independent legal advice pertaining to the DFS in view of the pending personal disputes amongst the promoter family.

Atul Kirloskar, 65, runs KOEL and Kirloskar Ferrous Industries Ltd, while Rahul, 58, is managing Kirloskar Pneumatic Co Ltd. Their cousin, Vikram Kirloskar, 62, manages Toyota Kirloskar Motors. The group was founded by their great grandfather, Laxman, in 1910 and most of the listed companies are doing well financially.

KIL had raised questions whether the Kirloskar Brothers' board, especially its independent directors, verified the claims made by Sanjay Kirloskar in relation to DFS. Besides, KIL asked whether the board, including independent directors, sought any independent legal advice pertaining to the same, especially in view of the pending personal disputes amongst the promoter family.