Regulator Sebi has penalised Atul Kirloskar and others for violating norms pertaining to securities market.
Also, the entities have been barred from the capital markets for a period ranging three months to six months, the regulator said in three separate orders on Tuesday.
Kirloskar Industries Ltd (KIL) chairman Atul Kirloskar and others have been asked to disgorge Rs 16.6 crore of ill-gotten gains along with 4 per cent interest, and in addition a penalty of Rs 14.5 crore has been levied on them.
The Securities and Exchange Board of India (Sebi) had received various complaints alleging insider trading and bad corporate governance practices in the context of Kirloskar Brothers Ltd (KBL).
Following this, the regulator conducted investigation during the period from March 2010 to April 2011 in the matter relating to dealings in the KBL scrip to ascertain possible violation of the insider trading rules and PFUTP (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) norms.
Investigation revealed that the promoters and directors of KBL had traded in the scrip of KBL while in possession of unpublished price sensitive information (UPSI) and got wrongfully benefitted by avoidance of losses.
Besides, they had submitted incorrect declarations to KBL stating that they are not in possession of UPSI.
In addition, it was found that they committed fraud on KIL and its public shareholders.
Then directors of KIL -- Atul Chandrakant Kirloskar, Nihal Gautam Kulkarni, A R Sathe and A N Alawani -- had induced KIL to buy shares from KBL's then six promoters, thereby aided them to sell the shares of KBL to KIL at a time disadvantageous to KIL and its minority shareholders.
As per Sebi, Alpana Rahul Kirloskar, Arti Atul Kirloskar, Jyotsna Gautam Kulkarni, Rahul Chandrakant Kirloskar, Atul Chandrakant Kirloskar and late Gautam Achyut Kulkarni were promoters of KBL and KIL.
All the nine entities had caused unfair treatment to the minority shareholders of KIL in a fraudulent manner and violated the provisions of PFUTP norms, the regulator noted.
It further said legal representatives of late Gautam Achyut Kulkarni would disgorge the amount.
Through a separate order, the regulator has imposed a penalty of Rs 5 lakh on Kirloskar Industries Ltd for violating listing conditions.
The decision to invest an amount of up to Rs 275 crore in shares of KBL, taken by the company's board in July 2010 was a fraud that was perpetrated on KIL and its shareholders.
Sebi said the decision was price sensitive information, expecting to have a bearing on the performance of KIL. Hence, as per Equity Listing Agreement, KIL was required to immediately inform the stock exchanges of the decision, however, it failed to comply with the norm.
In a separate order, Sebi has barred four entities -- Sanjay Kirloskar, chairman of Kirloskar Brothers Ltd, his wife pratima Sanjay Kirloskar, Prakar Investments Pvt Ltd and Karad Projects and Motors Ltd -- from the capital markets for three months for violating insider trading norms.
Sanjay Kirloskar, his wife Pratima and Karad Projects and Motors' total liability due to ill-gotten gains and penalty is Rs 42.7 lakh.
A spokesperson for Atul and Rahul Kirloskar said Sebi has issued a ruling against certain promoters and directors of KIL in relation to their sale of shares in Kirloskar Brothers in 2010.
"Atul Kirloskar and Rahul Kirloskar reject any suggestion of wrongdoing and maintain that the share sale reflected all appropriate stock exchange disclosures and necessary regulatory pre-clearances at the time.
"We are currently reviewing Sebi's order and seeking appropriate legal advice. We remain confident of our position and plan to appeal the ruling shortly," the spokesperson said in a statement.
In a filing to BSE, KBL said its Chairman and Managing Director Sanjay C Kirloskar has informed the company that he has in his capacity as a Trustee of the Kirloskar Brothers Limited Employees Welfare Trust, received a Sebi order, dated October 20, in relation to an inter-se transfer of shares.
"He has further informed that he is seeking legal advice in this regard for further course of action," the filing added.