NEW DELHI: The Supreme Court has ordered status quo in the family feud related to assets of the 133-year-old corporate group, Kirloskar Brothers Ltd (KBL), wherein KBL’s CMD Sanjay Kirloskar has challenged the Bombay High Court order, directing arbitration in the case. 

The apex court’s status quo will also extend 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, a bench comprising Chief Justice N V Ramana and Justice Surya Kant issued notice on the appeal by Sanjay Kirloskar and asked them to file replies within six weeks. 

The top court asked the two Kirloskar brothers – Sanjay and Atul – with others to explore mediation to resolve the family dispute relating to the assets. 

Sanjay's appeal 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 or persons who are parties to the suit are not signatories of DFS and 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, according to the DFS, disputes relating to the Kirloskar Institute of Advanced Management Studies (KIAMS) and Kirloskar Foundation (KF) are to be resolved unanimously, and 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. 

The DFS made it clear however that only disputes relating to KIAMS and KF should be referred for arbitration and not other disputes, the appeal said. 

Another DFS clause stated that no one in the family would compete with any other member in the business. For instance, if one brother was manufacturing pumps, the other one would not engage in the same business, it added. 

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

Being aggrieved, KBL had earlier filed a case in a Pune civil court seeking Rs 750 crore damages for violation of the agreement, the appeal said. 

During the pendency of the suit in the Pune court, Atul, Rahul and other respondents had moved the Bombay High Court, saying that the DFS had a clause that in case of dispute the parties could 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.