Among the most accomplished of business groups in Maharashtra, the Kirloskar’s have been facing some turbulence among its family members. As reported by the Economic Times recently, it has emerged that the financial market watchdog Securities and Exchange Board of India (SEBI) is probing insider trading charges against Rahul Kirloskar and Atul Kirloskar based on the documents filed in NCLT.
As per media reports, SEBI has been inquiring into allegations of insider trading in Kirloskar Brothers Ltd (KBL), the flagship company of the Kirloskar Group. It is alleged that on October 6, 2010, a faction of the promoter group, namely Gautam Kulkarni, Rahul Kirloskar, Atul Kirloskar, Alpana Kirloskar, Jyotsna Kulkarni and Arti Kirloskar sold 1,07,18,400 shares of KBL, representing 13.51 per cent of the total paid up share capital of the company to Kirloskar Industries Ltd (KIL), a public Limited company managed by the transferors. The total value of this transaction amounted to approximately INR 275 crore.
SEBI said, in a notice to KBL, that shares of Kirloskar Brothers were acquired by Kirloskar Industries when unpublished price sensitive information about financial results of Kirloskar Brothers was not in public domain. SEBI has also sought information about the persons who were in possession of information regarding financial results.
Shares of KBL more than halved within six months of this transaction by the promoters.
As reported in Mint, a spokesperson for Atul and Rahul Kirloskar said: “As far as we are aware, no investigation is pending in respect of the said transaction undertaken in 2010.” The person added that they reserve legal rights on factually incorrect statements.
Mr. Sandeep Phadnis, Associate Vice President and Head Secretarial at Kirloskar Brothers has confirmed the probe by SEBI. “We are unable to comment on any of them at this stage as the issues are being looked into by Sebi, a related matter is pending before NCLT and therefore the issues are sub judice”
ABOUT THE KIRLOSKARS BEING PROBED BY SEBI
Mr. Atul Kirloskar is the Executive Chairman of Kirloskar Oil Engines Limited, a listed entity. He has recently committed INR 1000 crores investment over three years in Kirloskar Capital, a wholly owned subsidiary of Kirloskar Oil Engines Limited after The Reserve Bank of India granted a NBFC licence.
Mr. Rahul Chandrakant Kirloskar, B.Sc, serves as an Executive Officer of Kirloskar Engines India Ltd. of Kirloskar Industries Ltd. He has been with Kirloskar Group of Companies for more than 19 years at senior levels in different capacities.
Penalties for Insider Trading
If someone is caught in the act of insider trading, he can either be sent to prison, charged a fine, or both. According to the SEC in the US, a conviction for insider trading may lead to a maximum fine of $5 million and up to 20 years of imprisonment. According to the SEBI, an insider trading conviction can result in a penalty of INR 250,000,000 or three times the profit made out of the deal, whichever is higher.
SEBI is also empowered to prohibit an insider from investing in or dealing in securities, declare violative transactions as void, order return of securities so purchased or sold. Any person contravening or attempting to contravene or abetting the contravention of the Act may also be liable to imprisonment for a term which may extend to ten years or with fine which may extend to INR 250,000,000 or with both.
The Regulations, also, prescribe certain disciplinary sanctions that may be taken by companies or market intermediaries to require due compliance of the Regulations.
Also read: The Satyam Case: Insider Trading and Pledge
Mr. Ramalinga Raju and entities belonging to the promoter group of Satyam Computers for violation of SEBI regulations on insider trading and fraudulent market practices.
