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Kirloskar Feud: Supreme Court Directs Status Quo on Civil Suit, Bombay High Court Order

Kirloskar Feud: Supreme Court Directs Status Quo on Civil Suit, Bombay High Court Order

On Tuesday (27, July, 2021), the Supreme Court ordered a stay of proceedings in the Kirloskar Brothers Ltd family feud over assets, in which KBL's CMD Sanjay Kirloskar had challenged the Bombay High Court's order directing arbitration in the case.

The Supreme Court's decision will apply to the proceedings in the Pune civil court on KBL seeking damages for breach of the family deed.

A bench comprised of Chief Justice N V Ramana and Justice Surya Kant issued notice on Sanjay Kirloskar's appeal and asked the parties to file responses within six weeks, asking them to explore the possibility of mediation.

The Supreme Court directed the Kirloskar brothers, Sanjay and Atul, and others to seek mediation to resolve the family dispute over the assets.

"We both (judges) believe it is one of the well-known families and businesses. We believe that resolving the issues through mediation or arbitration is better for the company, "according to the bench.

"You continue to litigate in civil courts, you know. I'm not going to make any comments about the system. All of the lawyers can sit down and work out a solution, and if you need some outside help, we can appoint a retired judge. Why do you want to fight this lawsuit if you don't have to? You have the option of a different resolution. There must be some common family members who can mediate , " the bench added.

The feud over the deed of family settlement relates to the assets of the more than 130-year-old Kirloskar group, and Sanjay Kirloskar moved the apex court against the Bombay high court order that relegated the dispute to arbitration.

The appeal argued that the high court's order is factually and legally untenable and misconceived, that it contains serious errors of fact and law, and that incorrect findings were reached on erroneous grounds.

"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, thus not signatories to the arbitration agreement," the appeal stated.

In 2009, members of the Kirloskar family joined the DFS.

According to the appeal, disputes involving Kirloskar Institute of Advanced Management Studies (KIAMS) and Kirloskar Foundation (KF) are to be resolved unanimously, and if there is no unanimity, the issue is to be referred to two arbitrators – Anil Alwani and C H Naniwadekar. If they disagree, the dispute will be referred to a third arbitrator, Srikrishna Inamdar. 

The DFS, on the other hand, makes it clear that only disputes relating to KIAMS and KF will be referred to arbitration, according to the appeal.

Another DFS clause states that no member of the family may compete in business with any other member. For example, if one brother manufactures pumps, the other would not be in the same line of work, according to the statement.

According to KBL, Rahul and Atul violated this clause by acquiring a stake in a pump manufacturing company, La Gajjar Machineries Pvt Ltd.

KBL had previously filed a case in a Pune civil court seeking Rs 750 crore in damages for breach of the agreement, according to the appeal.

During the pendency of the suit in Pune, Atul, Rahul, and other respondents moved the Bombay High Court, claiming that DFS had a clause stating that in the event of a dispute, the parties could go to Arbitration.

Following a hearing on their petition, the Supreme Court agreed with them and ordered a resolution through arbitration.

This order is now being challenged in the Supreme Court by Sanjay Kirloskar, who claims that only disputes relating to KIAMS and KF will be referred to arbitration and that the arbitrators will not hear any other disputes.

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