It's a nasty family fight that has gone into several rounds. Now, the Kapur family, which controls the Atlas Group could be readying for another bruising battle in the courts.

The latest round in the family squabbles began on August 31 when key family members held a closed-door conclave at Delhi's Taj Palace Hotel.

Also in tow were a handful of top corporate lawyers who scrutinised every line of the documents on the table.

One conspicuous absentee was Arun Kapur who in April was ousted from the post of additional joint president in Atlas Cycles (Haryana) Ltd.

The August 31 meeting was yet another round in the battle between Arun Kapur and his uncles, cousins and brothers.

The meeting formalised a new management structure under which the group will be split into three parts, each of which will be managed by different wings of the family.

Is this a new management structure brought into place to revive the group's flagging profits? Or, is it an informal division of assets along the lines of recommendations made earlier in the year by consultancy firm Ernst & Young? That's the question that could end up in the courts once again.

E&Y came into the picture earlier this year after the battles between Arun Kapur and the other wings of the family went from bad to worse.

While valuing the company's assets at about Rs 175 crore (Rs 1.75 billion), E&Y divided the company's assets in three clusters. It had suggested that the division be done by drawing lots amongst the three families.

But the E&Y plan went for a toss in May after Arun Kapur moved the Delhi High Court for a stay on its implementation.

Arun Kapur said that he and his sons had not been consulted by E&Y before the report was submitted. This, he said, was a condition in the memorandum of understanding signed by the family before appointing E&Y as a consultant.

Arun Kapur believes that the family has informally divided the group's assets on the lines suggested by E&Y earlier in the year. However, the other family members say it is just an extensive management change.

"Since the profitability of the company has slipped from Rs 14 crore (Rs 140 million) to Rs 8 crore (Rs 80 million) during the last couple of quarters, the control of the three manufacturing units of Atlas at Sonepat, Malanpur and Sahibabad with three independent management committees will ensure better coordination and functioning of the units," says Gautam Kapur, new joint president for the Sahibabad division.

He adds that the management change was just an arrangement for ensuring better profitability, cost-effectiveness as well as better financial health in the company.

However, the family is looking at going ahead with the E&Y plan as rapidly as possible.

Says Gautam Kapur: "We expect the High Court order to be vacated in a month or two and then we would go ahead with our original plan of drawing lots and division of assets between the families as suggested by E&Y."

Arun Kapur, on the other hand, says he will approach the Delhi High Court in the next week against the change in management and division of assets.

This could set the stage for a bigger battle for control of the group. Arun Kapur is hoping to persuade outside shareholders to support him so that he will have a majority on the board.

While Arun holds 11 per cent stake in Atlas Cycles, 51 per cent equity is with the public. The other group companies hold 11 per cent in the company while the remaining family holds 27 per cent stake.

"Effectively, he just needs the support of another about 25 per cent stake in the company to claim management control at the general meeting in accordance with the Company Law Board guidelines," a source close to him said.

If that happens it would be a major coup for Arun Kapur. So far he has tried for a clean break from the other wings of the family. After being removed from the company, he had asked the others to either buy out his 11 per cent stake or sell their 27 per cent stake to him.

Then he gave them three options including giving him control of a group company called Atlas Auto Cycles and a departmental store owned by the family in Delhi's Connaught Place, which is valued at Rs 8 crore (Rs 80 million).

Alternatively, he suggested that Atlas Auto Cycles and the Dewan Harnam Das Saraswati Devi Trust should be given to him.

As a third option, he suggested that the department store and the Harnam Das Saraswati Devi Trust should be given to him.

He said he would resign from the other group companies if he got these. However, the family ignored his suggestions.

The roots of the battle were laid when in January 1999, it became clear that different wings of the family wanted to diversify into new directions.

So, the family decided to divide the assets equally. An MOU was signed which stated that till the assets were divided, a status quo would be maintained and that the person in charge of a particular business would continue.

Arun Kapur was then looking after the Malanpur unit in Madhya Pradesh which was the main bone of contention since the unit accounted for 80 per cent of the company's profits.

In 2000, after the death of Arun's father B D Kapur, the tussle for power started.

A three-member joint management committee was set up including Arun Kapur and his two uncles Jaidev Kapur and Jagdish Kapur. Arun Kapur accuses his uncles with not informing him about what was happening in the company.

What impact have the family squabbles had on the business? According to Arun the company was the second largest cycle manufacturer in India making about 2.9 million cycles in 2000. The industry leader Hero made about 5 million cycles that year.

In 2002-03 the Hero Group made around 5.4 million cycles and the TI Group became the second largest manufacturer with 2.9 million cycles.

Atlas has slipped and made only 2.1 million cycles in 2002-03. Profits have also fallen from Rs 14 crore (Rs 140 million) in 2000-01 to Rs 6 crore (Rs 60 million) in 2002-03.

AM Ahmedi, the former chief justice was then appointed as the family arbitrator to overlook a fair division of assets.

While some people say that he was also present at Taj Palace when the family drew the lots, Ahmedi refused to comment on the matter saying that it was a family business.