December 7, 2021

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Kirloskar family dispute: SC seeks views of Atul Kirloskar, 13 others on mediation

The Supreme Court on Thursday asked industrialist Atul Chandrakant and 13 others, made respondents by Ltd (KBL) in an appeal, to apprise it of their opinion on the issue of mediation to settle the family feud related to assets. KBL, whose Chairman and Managing Director is Sanjay Kirloskar, has challenged a Bombay High Court order directing arbitration in the assets case. The top court on July 27 had ordered status quo in the matter and asked the parties involved to explore the possibility of mediation.

A bench headed by Chief Justice N V Ramana took note of the submissions of senior advocates including A M Singhvi appearing for Kirloskar Brothers Ltd and Shyam Divan on the issue of mediation and asked the counsel for Atul Chandrakant Kirloskar and others to appraise their views on the matter.

“At the request of Ritin Rai, senior counsel appearing on behalf of respondent Numbers 1, 3 to 6 and 9 to 17 in SLP(C)No.8221/2021 to enable him to seek instructions, list on December 2,” the bench, also comprising Justices A S Bopanna and Hima Kohli, said.

The bench was apprised that some parties are agreeable to mediation by former Supreme Court judge Indu Malhotra and it has been said that all companies, which are not parties in the court proceedings, should also be part of the mediation.

At the outset, Singhvi said the mediation will be a futile exercise if all the companies and individuals are not bound by the outcome.

“If any company or an individual says no then the mediation will be a futile exercise,” he said, adding the respondents are buying companies and building assets.

The top court said it may then have to pass some interim orders as there has to be “some fairness” and no party should take undue advantage. Taking note of the submissions, the bench asked the lawyer to take instruction on mediation.

On November 12, the bench had agreed to hear the plea of Kirloskar Brothers against the Bombay High Court order directing arbitration in the assets case.

“This was the Kirloskar family dispute wherein the court on July 27 had expressed views on exploring the mediation possibility and it is very sad that we have written about even appointing the mediator. Now we are three-four months down and mediator has been appointed,” Singhvi had said.

Before this, the bench had ordered status quo in the case between feuding family members of the Kirloskar group and it was also extended to the proceedings in the Pune civil court on KBL seeking damages for violation of the family deed.

Asking the parties involved in the case to explore the possibility of mediation, the bench had issued notice on the appeal by Sanjay Kirloskar and asked them to file replies within six weeks.

The Supreme Court had asked the Kirloskar brothers — Sanjay and Atul — to explore mediation to resolve the family dispute relating to the assets.

The feud over the deed of family settlement relating to the assets of the more than 130-year old Kirloskar group reached the apex court after Sanjay Kirloskar appealed against the Bombay High Court order that had relegated the dispute to arbitration.

In the appeal, it was contended that the order of the High Court is factually and legally untenable and misconceived and it contains serious errors of fact and law and incorrect findings have been arrived at on an erroneous basis.

“The judge has grossly erred in referring the Deed of Family Settlement (DFS) suit and the parties thereto, to arbitration even though certain entities/persons who are parties to the suit are not signatories of DFS, hence not signatories to the arbitration agreement,” the appeal stated.

The Kirloskar family members had entered into the DFS in 2009.

According to the appeal, under the DFS, disputes relating to the Kirloskar Institute of Advanced Management Studies (KIAMS) and Kirloskar Foundation (KF) are to be resolved unanimously. In case there is no unanimity, the issue is to be referred to two arbitrators — Anil Alwani and C H Naniwadekar. If they differ in opinion then the dispute is to be referred to the third arbitrator, Srikrishna Inamdar.

DFS makes it clear that only disputes relating to KIAMS and KF shall be referred for arbitration and not other disputes, the appeal said.

Another DFS clause states that no one in the family will compete with any other member in business, it added.

According to KBL, this clause has been violated by Rahul and Atul who have taken a stake in a pump manufacturing company, namely La Gajjar Machineries Pvt Ltd.

Being aggrieved, KBL had earlier filed a case in a Pune civil court seeking Rs 750 crore damages for violation of the agreement. During the pendency of the suit in Pune court, Atul, Rahul and other respondents moved the Bombay High Court saying DFS had a clause that in case of dispute the parties can go in for arbitration.

The high court, hearing their plea, had agreed with them and ordered a resolution through arbitration.

This order has now been challenged by Sanjay Kirloskar in the top court on the ground that only disputes relating to KIAMS and KF shall be referred for arbitration and no other disputes would be entertained by the arbitrators.

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