The promoters of Pune-based Kirloskar Brothers have been penalised by SEBI in a decade-old insider-trading case. The regulator has asked Rahul and Atul Kirloskar to pay up ₹31.21 crore in 45 days. They have also been banned from dealing in the markets for six months.

Additionally, SEBI has asked Sanjay Kirloskar, his wife Pratima, and an associate company Karad Projects and Motor together to pay ₹42.77 lakh for similar violations. The promoters were charged under SEBI’s Fraudulent & Unfair Trade Practices Act, Section 15H.

This comes even as Rahul and Atul are locked with brother Sanjay in a dispute over the division of family assets. In the case related to inside-trading also, the two sides had blamed each other for violating rules. SEBI said in its order that both camps sold shares of Kirloskar Brothers Ltd based on advance knowledge of the company's deteriorating financial position.

On October 6, 2010, the promoter group sold 10.72 million KBL shares worth over ₹275 crore to Kirloskar Industries (KIL), controlled by Rahul and Atul. KBL’s financial position 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 sale, SEBI noted.

Due diligence failure

KIL’s directors, too, were charged with failure in discharging their duty to act in good faith and with due diligence in the in the interest of the company, resulting in fraud, the regulator said.

 

Responding to the SEBI order, a KIL spokesperson said: “Atul and Rahul Kirloskar reject any suggestion of wrongdoing and maintain that the share sale reflected all appropriate stock exchange disclosures and necessary regulatory pre-clearances at the time. We are reviewing SEBI’s order and seeking legal advice. We remain confident of our position and plan to appeal the ruling shortly.

Sanjay Kirloskar and his wife are charged with insider trading for selling KBL shares on October 10, 2010 with information regarding capital loss of the investment/advances given to subsidiary Kirloskar Construction and Engineers Ltd through writing off the loan/advances of ₹67.47 crore that was made public in April 2011. The shares were sold to Prakar Investments Pvt Ltd, where Sanjay and his wife Pratima Kirloskar were the owners. Sanjay and Pratima had told SEBI that the sale of shares was to their personal company.

Rahul and Atul Kirloskar are locked with brother Sanjay in a dispute over the division of family assets. SEBI said both camps sold shares of Kirloskar Brothers based on advance knowledge of its deteriorating financial position

 

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