The Supreme Court’s effort to bring truce in the family of Kirloskars through mediation faces obstacles as the two warring factions are adamant about their rights on brands and opinion on the validity of a non-compete clause in their deed of family settlement (DFS) agreement. “Both the parties are expected to agree to the apex court’s suggestion of mediation, but reaching an amicable settlement through the process will be difficult,” said sources close to the development.
The dispute has Sanjay Kirloskar, Chairman and Managing Director (CMD) of Kirloskar Brothers Ltd. (KBL), a pump manufacturing company, on one side and his elder brother Atul (CMD of Kirloskar Engine Oils Ltd.) and younger brother Rahul (CMD of Kirloskar Pneumatic Company Ltd.) on the other. The three Kirloskar brothers are sons of late industrialist Chandrakant Kirloskar and his wife Sumantai.
On July 27, the Supreme Court suggested the 130-year-old business family try and settle the dispute through mediation rather than pursuing litigation. The apex court asked both parties to file replies within six weeks and suggest names of mediators for the resolution of the dispute. The bench of Chief Justice of India NV Ramana and Justice Surya Kant also offered the service of a retired Supreme Court judge to oversee the mediation process.
The feud in the Kirloskar family reached the apex court when Sanjay Kirloskar challenged the Bombay High Court’s order that had referred the dispute to arbitration in May. Sanjay requested the SC to quash the Bombay HC order and pleaded for the parties and all other family members to submit to the proceedings in a Pune Civil Court, where he seeks damages for violation of DFS. At the same time, Atul filed a caveat to prevent Sanjay from getting an ex-parte order from the apex court.
According to sources close to the family, the mediation will be a tough job as ownership of brand ‘Kirloskar’ and its usage and the validity of DFS and the non-compete clause in it are at the centre of the dispute. “Can everybody use the Kirloskar brand across their products, including the new ones? Should the estranged brothers and their companies stay away from each other’s businesses because of a non-compete clause in the DFS? These are contentious issues that need to get clarity through the legal introspection,” said a senior lawyer.
Sanjay’s faction claimed that Atul, Rahul and their spouses sold their shares in KBL to Kirloskar Industries Ltd.—breaching the terms of the DFS which they signed in 2009. They also accused that Atul and Rahul breached a non-compete agreement by acquiring La Gajjar Machineries in 2017—another pump manufacturing company. “Kirloskar Oil Engines, which acquired La Gajjar, has also used the name Kirloskar in their campaign to mislead the buyers,” a source close to him said.
Sanjay also had filed a complaint with the Securities and Exchange Board of India (SEBI) alleging that some companies run by his brothers have misled investors by usurping its more-than-130-year-old legacy and passing it off as their own. According to sources close to Sanjay camp, Atul and Rahul ousted the other brother from Kirloskar Proprietary Ltd., which had the proprietary rights of family trademarks, by not supporting his re-appointment.
But Atul-Rahul camp said that the copyright of the brand ‘Kirloskar’ is with Kirloskar Proprietary Ltd. and it is clearly put out on the Kirloskar website. “Can one brother exclusively claim the legacy of ancestors and the businesses they started?” asked a legal source. They also claimed that the DFS is a family settlement agreement, not a business settlement. “No company has adopted the DFS,” another source said.
The mediation efforts had earlier stonewalled at the non-compete clause. After one of the mediations in 2017-18, eminent economist Vijay Kelkar wrote, “There is one issue which was not resolved related to infraction of the non-compete clause of the DFS.”
Considering the large business interests of the two factions, the job of mediation will be tough in the case of the Kirloskar brothers.