In a move that is stirring attention in corporate governance circles, Kirloskar Industries Ltd has appealed to the Securities Appellate Tribunal (SAT) challenging a recent directive issued by the Securities and Exchange Board of India (SEBI). The directive, received on December 30, 2024, mandates that the company disclose the Deed of Family Settlement (DFS) entered into by the members of the Kirloskar family.

The Dispute and SEBI’s Directive

SEBI’s order was made under Regulation 30A of the SEBI Listing Obligations and Disclosure Requirements (LODR) regulations, which govern transparency and corporate disclosures in listed companies. According to SEBI, Kirloskar Industries is required to publicly disclose the Deed of Family Settlement, which was signed on September 11, 2009, as part of the company’s commitment to adhere to disclosure norms under these regulations.

The DFS pertains to a private family arrangement that governs the ownership and management structure within the Kirloskar family, who have long been involved in the leadership of Kirloskar Industries. SEBI’s demand for disclosure stems from its effort to ensure that material events affecting shareholders are disclosed transparently.

Kirloskar’s Response and Legal Appeal

In response, Kirloskar Industries has stated that it is challenging SEBI’s order before the SAT, citing concerns over the disclosure of the family settlement, which the company believes may be of a private nature and not necessarily relevant for public disclosure under the current regulatory framework. The appeal seeks to reverse or delay the SEBI directive.

Implications for Corporate Governance

This legal challenge brings to light issues of corporate governance, especially regarding the balance between private family agreements and the need for public disclosure to shareholders. It also reflects ongoing tensions between regulatory oversight and the internal affairs of family-run businesses in India. The Kirloskar family has a long history of controlling the company, making this case particularly significant for both corporate law and the corporate governance landscape in India.

The outcome of this appeal will have important consequences not only for Kirloskar Industries but also for other family-owned businesses in India, as it may set a precedent for how family settlements are treated in the context of public disclosures.

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