The inability of the Bangalore-based KIFL to pay back the matured deposits to its depositors had sparked off rumours that the management had changed hands. However the Kirloskar family members in Pune reiterated that despite the sale of 14 per cent equity, the rest of the family still held stake in the company and were keen on retaining it.

``Vijay shared with us the various options before KIFL. Bringing in a partner, however, was considered the best option,'' Sanjay Kirloskar and Rahul Kirloskar, chairman and managing director, Kirloskar Pneumatic Co Ltd mentioned, expressing confidence that whatever Vijay had done was in the best interests of the customers. The family members however, were unclear if Vijay Kirloskar still held any stakes in KIFL. Both Sanjay and Rahul hold five per cent stakes in KIFL.

Both the brothers met the press recently to scotch rumours of any possible split in the family. Sanjay Kirloskar maintained that complex cross holdings between various Kirloskar group had led to fears of a possible impact of this sale on other group companies but would have no effect on the manufacturing companies since KIFL did not hold any stakes in the manufacturing companies.

With reports of depositors thronging the Bangalore office of KIFL for repayment of the deposits, N D Patankar, chief executive of KIFL issued a statement to clarify the company position. He described the inability of the company to repay deposits as a ``temporary set-back'' and attributed this to the slowdown in the economy and the delay in the recovery of dues from its customers. ``The company has made investment in valuable properties and some of these are locked up in real estate, lease and hire purchase transactions,'' he stated, explaining that efforts were being made to recover these dues and pay off the depositors.

KIFL has advanced loans aggregating Rs. 100 crore to Hindustan Antibiotics Ltd, Kedia group, Bellary Steels, Lok Housing, Mantri Housing, Prakask Industries, Jord Engineering, Motorol India Ltd, B G Shirke, BI TV, Beta Napthol, Advent Computers, Mahadeo Leasing Ltd, Volant Textile Mills Ltd, Mardia Copper Products Ltd, Vijayshree Chemicals Ltd, Jain Irrigation, Steel Tubes of India and the Damania group.

Patankar mentioned that the company is also approaching the Company Law Board for re-scheduling of payments to depositors. The statement also mentioned that a new party from Ahmedabad was brought in to efficiently run the company and pay off the depositors. The new party of Ahmedabad, which has been inducted into the management of the company, includes persons of experience in the financial sector and they will ably handle the recovery of dues from the company's customers, he said.

The Reserve Bank of India (RBI) meanwhile, has prohibited KIFL from accepting public deposits from any person, in any form whether by way of fresh deposits or renewal of the existing deposits or otherwise, until further orders.