Why has DFS become a cause of feud between the Kirloskar brothers?  

The Kirloskar siblings have locked horns over several matters related to the Deed for Family Settlement (DFS) entered on September 11, 2009, covering companies under their control. The issues are being heard in various courts across Pune, Mumbai High Court, and the Supreme Court.

The DFS is a family settlement agreement between members of the Kirloskar family, to clearly define ownership, management and control over different Kirloskar Group Companies by each respective branch and in the manner stipulated therein.

Taking the DFS on record by the signatories and its selective implementation is the root cause of the feud between the Kirloskar siblings. 

On October 21, 2022, Rahul and Atul Kirloskar-led Kirloskar Industries Limited (KIL) wrote to the exchanges raising questions on Sanjay Kirloskar-led Kirloskar Brothers Limited (KBL)  on whether the company has taken the DFS on record. KBL, in April 2016, informed the Bombay Stock Exchange about the DFS and taken it on record.

Implementation of DSF

Implementing the DFS is another concern where Kirloskar Brothers Limited (KBL) has raised a red flag. Kirloskar Oil Engines Limited (KOEL) acquired 76 per cent stake in Ahmedabad-based La-Gajjar Machineries Private Limited (LGM) in 2017 and completed the acquisition in September this year, whereby LGM became a 100 per cent subsidiary of KOEL. According to KBL, KOEL “breached” the non-compete clause of the DFS and had to approach the courts.  

In its exchange filing on the exchange last week, KBL reported “As a result of companies owned, managed and controlled by RCK and ACK engaging in businesses competitive with that of KBL, in breach of the DFS, KBL was left with no other alternative but to adopt proceedings from June, 2018, both before the Hon’ble Pune Courts and the Hon’ble Supreme court, to protect its business and interests and that of the general body of its shareholders”

Equity Shares

Meanwhile, Kirloskar Industries Limited (a listed company, owned, managed and controlled by Rahul and Atul Kirloskar) in pursuance of and as a consequence of the implementation of the DFS, sold equity shares held by it in Toyota Kirloskar Motors Pvt. Ltd. and other Toyota related joint venture companies to Kirloskar Systems Limited (a private company under the ownership, management and control of Vikram Kirloskar, who is also a signatory to the DFS) in December, 2009 aggregating to about Rs. 250 crores. 

According to KBL in the same exchange filing, some of the other steps taken in the implementation of the DFS included a change in shareholding of the concerned companies by the schedules of the DFS, a change in the composition of the Board of Directors of the concerned companies, per the schedules of the DFS and disclosures were made under the erstwhile takeover code 1997 and exemptions where sought under the erstwhile takeover code 1997 from making an open offer in view of changes in the shareholding of the concerned companies.