Securities market regulator Securities and Exchange Board of India (SEBI) has barred the country's biggest public listed real estate developer DLF Limited, its billionaire promoter K P Singh, son Rajiv and daughter Pia among three other group executives from accessing the securities market for three years over lapses in making a material disclosure during its IPO filing.
The order—which bars the firm, its promoters and key executives TC Goyal, Kameshwar Swarup and Ramesh Sanka from accessing the securities market and prohibit them from buying, selling or otherwise dealing in securities, directly or indirectly—comes into force with immediate effect.
It deals a severe blow to the company in its proposed plans to raise money through commercial mortgage backed securities to retire its debt pile.
An email query to the firm for an official comment on the development and if it plans to contest the decision did not immediately elicit a response.
DLF scrip sank 3.7 per cent to end the day at Rs 146.7 a share on the BSE in a strong Mumbai market on Monday.
The case dates back seven years ago when DLF filed its documents for its IPO in 2007. An individual Kimsuk Krishna Sinha had filed two complaints with SEBI on June 4, 2007 and July 19, 2007. He had stated that Sudipti Estates and certain other persons had duped him of Rs 34 crore in relation to a land transaction and he had registered an FIR against Sudipti and at that time it was a step down subsidiary of DLF.
In view of the said allegations, Sinha had requested that considering the imperative of safeguarding the interests of general public, the listing of DLF pursuant to the IPO be disallowed and immediate action be taken in this regard. DLF had replied to him that it was not connected with Sudipti at that point of time.
Sinha had later approached the Delhi High Court, which had called for an investigation by SEBI. SEBI had issued a show cause notice in June 2013 to the defendants, stating that DLF had transferred ownership of Sudipti to certain relatives of the company's employees through an allegedly sham transactions to camouflage its association with the privately held firm.
DLF and other defendants in the case had countered that at the time of filing IPO documents Sudipti was not a subsidiary and that SEBI had transgressed its authority in its investigation of the case as the complaint by Sinha did not specifically relate to disclosures.
SEBI ruled that even after DLF sold its stake in Sudipti, it continued to have significant control on its management as the new shareholders were spouses of key management personnel of DLF.
In an order dated October 10, Rajeev Kumar Agarwal, a whole-time director of SEBI, said DLF and six of the seven individuals named in the case failed to make requisite disclosures about related party transactions in its IPO documents and executed a 'sham' transaction to camouflage the case.
The SEBI order said that it was satisfied that the violations as found in this case are grave and have larger implications on the safety and integrity of the securities market.
“In my view, for the serious contraventions as found in the instant case, effective deterrent actions to safeguard the market integrity. It, therefore, becomes incumbent to deal with contraventions, digression
and demeanour of the erring noticees sternly and take appropriate actions for effective deterrence,” said SEBI's Agarwal.
DLF, T C Goyal and Ramesh Sanka were represented by Janak Dwarkadas and Shardul Shroff, one of the partners of India's top corporate law firm Amarchand & Mangaldas & Suresh A Shroff & Co.
K P Singh, Rajiv Singh and Pia Singh were represented by J J Bhatt and Shroff while G S Talwar (who was not named in the final SEBI ruling) and Kameshwar Swarup were represented by Somasekhar Sunderasan and Paras K Parekh.
(Edited by Joby Puthuparampil Johnson)
