Why did DFS cause a dispute between the Kirloskar brothers?

The Kirloskar sisters are involved in several issues related to the Family Settlement (DFS) filed on September 11, 2009, involving companies under their control. Matters are heard in different courts of Pune, Mumbai High Court and Supreme Court.

The DFS is a family agreement between the members of the Kirloskar family to clearly define the ownership, management and control of the various Kirloskar Group Companies by and under each respective affiliate.

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The registration of the DFS by the signatories and its selective implementation is the main reason for the dispute between the Kirloskar brothers.

On October 21, 2022, Rahul and Atul Kirloskar-led Kirloskar Industries Limited (KIL) wrote to the exchanges, asking Sanjay Kirloskar-led Kirloskar Brothers Limited (KBL) whether it should list DFS. KBL filed and listed DFS with the Bombay Stock Exchange in April 2016.

Implementation of DSF

Implementation of DFS is another concern that Kirloskar Brothers Limited (KBL) has raised a red flag. Kirloskar Oil Engines Limited (KOEL) acquired a 76 percent stake in Ahmedabad-based La-Gajjar Machineries Private Limited (LGM) in 2017 and completed the acquisition in September this year, making LGM a 100 percent subsidiary of KOEL. According to KBL, KOEL “violated” the non-compete clause of the DFS and had to go to court.

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In its stock exchange filing last week, KBL said, “As a result of companies owned, operated and controlled by RCK and ACK engaging in businesses that compete with KBL, in violation of the DFS, KBL was left with no alternative. From June 2018 to take proceedings both in Hon’ble Pune Courts and Hon’ble Supreme Court to protect its business and interests and those of its general body of shareholders”

Shares

Meanwhile, Kirloskar Industries Limited (a listed company owned, managed and controlled by Rahul and Atul Kirloskar) for the purpose of implementing DFS and as a result thereof Toyota Kirloskar Motors Pvt. Ltd. and other Toyota-related joint venture companies were merged into Kirloskar Systems Limited (a private company owned, managed and controlled by Vikram Kirloskar) in December 2009 for around Rs. 250 million.

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According to KBL in the same exchange document, some other steps taken in the implementation of the DFS include changing the shares of the respective companies as per the schedules of the DFS, making changes in the composition of the Board of Directors of the respective entity. companies were exempted from making public bids as per DFS schedules and disclosures were previously sought under takeover code 1997 and takeover code 1997 taking into account changes in shareholdings of the companies concerned.

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