Why Kirloskars Are Fighting Sebi Over a 27-Year-Old Family Deed

The conflict within the Kirloskar family is once again set to play out in public, this time with market regulator Securities and Exchange Board of India (Sebi) drawn into the dispute. The diversified engineering group, known for manufacturing pumps, diesel engines, compressors, chillers, and also operating in the automotive space through the Toyota Kirloskar JV, has already seen two major public breakups in 2000 and 2009.

Now, the last split agreement, which divided the group among the fourth generation of Kirloskars, is at the centre of a legal dispute between Sebi and a group of publicly listed Kirloskar companies led by Atul Kirloskar. The matter is scheduled for a hearing at the Bombay High Court on August 20.

Rules Under Dispute

Kirloskar Oil Engines Ltd (KOEL), Kirloskar Ferrous Industries Ltd, Kirloskar Pneumatic Company Ltd, Kirloskar Industries Ltd, and GG Dandekar Properties Ltd have filed writ petitions challenging Sebi's new disclosure regulations. These petitions contest Regulation 30A, Clause 5A of Para A of Part A of Schedule III of the Sebi (Listing Obligations and Disclosure Requirements) Regulations, 2015, along with Sebi circulars dated July 13, 2023, and November 11, 2024, which operationalised the new rules.

These provisions require listed companies to disclose any agreements made by their promoters, shareholders, key managerial personnel, employees, or related parties if those agreements could affect management, control, or place any restriction or liability on the company—even if the company itself is not a signatory to the agreement.

Rohit Jain, Managing Partner at Singhania & Co., explains that these rules were introduced to improve transparency in listed companies—especially concerning private agreements among promoters or key persons.

“In simple terms, if promoters, directors, or related parties sign any agreement—privately or otherwise—even if the company isn’t directly involved, they must inform the company within two working days. And if those agreements could affect control or management, the company is required to disclose them to the stock exchanges and publish them on its website,” Jain said.

How the Dispute Started

Laxmanrao Kirloskar started the group in 1888 with a small bicycle repair shop in Belgaum. His son, Shantanurao Laxmanrao Kirloskar, later expanded the business, establishing Kirloskar Oil Engines Ltd and Kirloskar Electric Co. Ltd in 1946. Eventually, the group came under the control of three brothers managing four key listed companies.

The first major split came in 2000, when Vijay Kirloskar, representing the Bangalore-based side of the family, separated and took control of Kirloskar Electric Company and 15 associated firms.

The remaining businesses remained under the Pune-based branch led by Atul, Sanjay, and Rahul Kirloskar. To formalise further division, the family signed a Deed of Family Settlement (DFS) on September 11, 2009, which laid out leadership and shareholding responsibilities and reportedly included a non-compete clause. Under the agreement, Sanjay would lead Kirloskar Brothers Ltd (KBL), focused on pumps and motors; Atul would oversee KOEL; and Rahul would manage Kirloskar Pneumatic Company Ltd (KPCL).

The dispute began in 2017 when Sanjay Kirloskar accused Atul Kirloskar-led KOEL of breaching the DFS. He cited two violations, KOEL’s acquisition of La Gajjar Machineries, a pump manufacturer (allegedly violating the non-compete clause, since pumps were KBL’s core business) and KOEL's sale of KBL shares to Kirloskar Industries without adhering to the agreed transfer rules. Sanjay filed a civil suit in Pune and also approached Sebi.

In 2024, Sebi directed KOEL to disclose the DFS under its revised disclosure norms. KOEL challenged the order on two grounds.

“The question of whether the DFS is binding on the company is pending before the Civil Court since 2018, and despite this, Sebi has opined on matters that are sub-judice. Further, Sebi’s decision not only contains factual inaccuracies but also ignores settled principles of contract law, corporate law, and company law,” KOEL said in an exchange filing, adding that it is not bound by the DFS nor does the DFS impose any restriction or liability on it.

KOEL approached the Securities Appellate Tribunal (SAT), claiming it had no obligation to disclose the agreement. On January 17, a bench led by Justice D. Kumar, M. Swaroop, and Dr. D. Bhatnagar allowed KBL to intervene in the matter.

While the matter awaits further hearing, KOEL and four other group companies took Sebi to the Bombay High Court earlier this year, arguing that the disclosure rules were “disproportionate” and “impermissibly retrospective.”

KOEL’s Contention With Sebi

The Kirloskar Group companies argued that Sebi’s disclosure norms violate key principles of company and contract law, such as the doctrine of privity and the board’s exclusive authority over corporate decisions. They also warned that the rules could lead to unreasonable consequences, such as being required to disclose agreements made by unrelated or disgruntled individuals.

“It envisages absurd and unreasonable circumstances where… any employee (regardless of their position—even a disgruntled one)… can bind a listed entity to an agreement merely by informing the company of such an agreement,” the petitioners said, also accusing Sebi of encroaching on matters under the purview of civil courts.

Most of these arguments mirror KOEL’s earlier stance when Sebi was considering whether the DFS should be made public.

“Sebi’s Regulation 30A and Clause 5A mandate listed companies to disclose agreements entered into by promoters, directors, or key stakeholders—especially those that affect control, governance, or decision-making—even if the company itself isn’t a direct party. These rules aim to increase transparency and prevent secret arrangements that could materially impact the company or shareholders,” said Amit Tungare, Managing Partner at Asahi Legal.

Meanwhile, KBL has filed an intervention application highlighting that several listed companies—including Hikal Ltd, DCM Ltd, TVS Motor Co. Ltd, and Adani Wilmar Ltd—have already complied with Sebi’s rules without challenging them. KBL argued that, since the regulation has already been implemented widely, there’s no valid reason for other Kirloskar companies to challenge its constitutional validity at this stage, aside from alleged mala fide intent. Sanjay Kirloskar-led company has already disclosed its part of the family agreement.

“The purpose of these rules is to keep investors informed. Promoter disputes or private deals can significantly shape a company’s future—they can affect control, governance, or even trigger major management changes. Sebi wants to ensure such developments aren’t kept in the dark,” Jain added.

Tungare noted that this case could become a litmus test for determining the limits of regulatory reach into private commercial arrangements and may influence how corporate disclosure norms evolve in India.