**Sebi Prioritizes Shareholder Rights Over Promoter Privacy in Legal Dispute**
The Securities and Exchange Board of India (Sebi) has asserted before the Bombay High Court that the right of shareholders to access information takes precedence over the privacy claims of promoters regarding the disclosure of private agreements. In an affidavit responding to a challenge from five companies within the Kirloskar Group, Sebi emphasized the necessity for investors to be informed about any agreements that could influence a listed company’s management, control, or operations, even if the company itself is not a direct party to those agreements.
This affidavit, which has been reviewed, firmly counters the petitioners’ assertions that the regulations in question are arbitrary and excessive. Sebi’s filing represents a significant development in the ongoing legal battle initiated by the Kirloskar firms, which are contesting the validity of rules that require the disclosure of private family settlements and other agreements at the promoter level.
Central to Sebi’s argument is the principle of investor protection. The regulator pointed out that the disclosure of a 2009 Deed of Family Settlement (DFS) involving the Kirloskar companies, which it had advised on in December 2024, is essential for shareholders who have the right to be informed about such significant events or information.
The affidavit directly addresses the core of the Kirloskar companies’ petition. While the firms argue that being compelled to disclose a private agreement to which they are not a party constitutes legal overreach, Sebi maintains that the implications of such agreements on a listed entity render them material for public shareholders. Sebi stated that failing to disclose material information creates an information imbalance, leading to substantial market reactions when such information becomes public later.
The regulator highlighted that the 2023 amendment to its Listing Obligations and Disclosure Requirements (LODR) regulations was specifically implemented to address this issue. Sebi noted instances where promoters entered into agreements with third parties that imposed restrictions on the listed entity, yet these facts were not disclosed to the entity or its shareholders.
This legal conflict arose after five listed entities—Kirloskar Oil Engines Ltd, Kirloskar Ferrous Industries Ltd, Kirloskar Pneumatic Company Ltd, Kirloskar Industries Ltd, and GG Dandekar Properties Ltd—challenged Regulation 30A and Clause 5A of the LODR Regulations, labeling the rules as disproportionate and impermissibly retrospective. The companies have contested Sebi’s directive to disclose the 2009 DFS, which outlines control and ownership across various Kirloskar companies among different family branches.
However, Sebi dismissed these arguments as mere grievances against its directive, asserting that the petitions in the high court are premature and not maintainable, given that the companies have already filed an application.
**FAQ**
**Q: Why is Sebi insisting on the disclosure of private agreements?**
A: Sebi believes that shareholders have a right to be informed about any agreements that could impact a listed company’s management or operations, as non-disclosure can lead to significant market reactions and information asymmetry.
