SEBI is probing the role of promoters of Kirloskar Industries Limited, Atul Kirloskar and Rahul Kirloskar for a share transaction valued at ₹ 275 crs in a group company based on unpublished price sensitive information. The opinion by Ex SC Judge BN Srikrishna is a part of the findings submitted by KBL to SEBI.
As reported in the Economic Times earlier, it is alleged that on October 6, 2010, few members of the promoter group including Gautam Kulkarni, Rahul Kirloskar, Atul Kirloskar, Alpana Kirloskar, Jyotsna Kulkarni and Arti Kirloskar (transferors) sold 13.5% of company shares worth about ₹275 crore before financial results were reported on 8 October 2010 to Kirloskar Industries Limtied (KIL) another public limited company managed by the transferors.
Shares of KBL more than halved within six months of this transaction by Atul – Rahul Kirloskar faction of the family thereby causing loss to shareholders of Kirloskar Industries Limited.
Guilty of insider trading
As reported in the Business Line earlier, Former Supreme Court Justice Srikrishna in his detailed opinion has said that “testing the nature of information which was being shared with the board and members of the promoter group who were transferors, on a monthly basis, I am of the opinion that the transferors were in possession of material which could be deemed as unpublished price-sensitive material at the time of carrying out the transaction. Thus, they could be held guilty of insider trading.”
“Apart from this information, the financial performance of the company was being shared with the board and the members of the promoters group on a monthly basis. This was also price-sensitive information and only a limited number of people were privy to the same,” Justice Srikrishna noted.
Business Line also reported that Atul and Rahul Kirloskar did not send any response to them.
Gave false declaration
If SEBI relies on the opinion, it has serious fallout for the Atul – Rahul faction accused of insider trading.
Justice Srikrishna states that “As per the records, the Transferors had given declaration on Sept 28th 2010 to the Compliance
Officer of KBL that they do not have access to the price sensitive information. Hence, I am of the opinion that the Transferors (Family memebers of Atul Kirloskar and Rahul Kirloskar) obtained pre-clearance of the compliance officer by making false declaration, knowing fully well that the information given to the Compliance officer was false.”
He further opined that, “Giving false declaration for obtaining pre-clearance amounts to violation of FUTP regulations which prohibits dealing in securities in a fradulent or manipulative manner.”
Sebi has not concluded its probe yet. KBL said, “We are unable to comment on the same as a related matter is pending before the NCLT and the same is sub judice.”
Such reports raise questions on the credibility of Atul Kirloskar and Rahul Kirloskar. A faction of the family is also said to be exploring the sale of the $3.5 billion revenue KOEL to private equity groups like Blackstone.
