Kirloskar Brothers EGM: Shareholders reject call for forensic audit

Shareholders of Kirloskar Brothers Ltd have rejected a resolution for forensic audit of the affairs of the company by an external agency, according to a regulatory filing on Monday.

On December 8, an extraordinary general meeting of the company's shareholders was convened following requisition by Kirloskar Industries Ltd (KIL) along with Atul Kirloskar and Rahul Kirloskar, who together hold 24.92 per cent in Kirloskar Brothers Ltd (KBL), amid the simmering feud between Kirloskar siblings.

The ordinary resolution was rejected with 63.99 per cent of votes against it while 36.01 per cent were in favour, the filing said.

The resolution had called for the appointment of an independent forensic auditor for conducting a forensic audit to investigate and verify the expenses incurred by KBL on legal, professional consultancy charges over the past six years and the affairs of the company.

It had also sought investigation to verify all records, books of accounts, minutes books, and other documents of the company besides examining the conduct of the board of directors, including independent directors.

KBL board had advised its shareholders to reject the resolution saying "the requisitionists are not justified in questioning the independence of the Independent Directors or the decisions of the board" to initiate legal proceedings to protect the interest of the company.

The Kirloskar siblings, with KBL Chairman and Managing Director Sanjay Kirloskar on one side and Atul and Rahul on the other, have been in a feud since 2016 over the deed of family settlement for the assets of the more than 130-year-old Kirloskar group.

Rahul Kirloskar is the executive chairman of Kirloskar Pneumatic Co Ltd and Atul Kirloskar is the executive chairman of Kirloskar Oil Engines Ltd.

In October, Kirloskar Industries Ltd (KIL) along with Atul and Rahul Kirloskar, had sought convening of an extraordinary general meeting of shareholders of KBL seeking a forensic audit of the affairs of the latter by an external agency.

They had demanded that being a listed entity KBL should justify the rationale and basis on which it has been spending huge amounts aggregating to approximately Rs 274 crore towards payment of professional illegal expenses and consultancy charges ever since their dispute arose since on or about 2016.

After being cleared of insider trading charges labelled against them by the Securities Appellate Tribunal (SAT), Rahul and Atul had raised questions over corporate governance of KBL. They were accused of insider trading when they sold shares of KBL to KIL back in 2010.

They had accused KBL of "mis-utilising shareholder resources of a publicly listed company and misusing regulatory machinery" in the personal dispute of its Chairman & Managing Director Sanjay Kirloskar.

KIL had demanded that the audit must look into the conduct of the KBL board, especially the independent directors, on whether it has "verified the claims made by Sanjay Kirloskar in relation to the Deed of Family Settlement (DFS), in order to ensure that they have not been misled by the claims made" by the latter.

In its rebuttal, KBL had said the legal fees over the last seven years were approximately Rs 70 crore, while a "major portion of the said Rs 274 crore is professional fees paid to various Indian and overseas reputed consultants to improve the company's business"
 

Kirloskar Industries to look for other options

Kirloskar Industries said as a minority shareholder of KBL, it will examine options available to it to bring the instances of legal expenses to the attention of relevant authorities. “The examination of the scrutiniser’s report issued in respect of the EGM reveals that of the 158 shareholders who voted, 73 were in favour of the resolution proposed by us while 85 voted against. Further, while the institutional investors have voted against the resolution (perhaps on the back of the proxy advisory firm’s advice), over 60 per cent of the voting public-non institutions have voted in favour of the resolution proposed by us,” it said in a statement. BS Reporter