SEBI bars DLF, KP Singh, Directors and CFO from securities market for three years

The Securities and Exchange Board of India (SEBI) has barred DLF Limited (DLF) and its Chairman, Vice Chariman, three Directors and Chief Financial Officer from accessing and transacting in securities market for a period of three years. The decision was taken for violation of SEBI (Disclosure and Investor Protection) Guidelines, 2000 (DIP Guidelines), SEBI (Issue of Capital and Disclosure) Regulations, 2009 (ICDR Regulations) and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003.

The order was passed by whole time member of SEBI, Rajiv Kumar Agarwal on October 10 in complaints filed by one Kimsuk Krishna Sinha and pertains to the Initial Public Offering made by DLF in 2007 and its subsequent listing on the Bombay Stock Exchange and National Stock Exchange.

Sinha had initially filed complaints with the SEBI alleging that a company by the name of Sudipti Estates Private Limited (Sudipti) had duped him of Rs. 34 crore. His contention was that Sudipti was owned by two DLF companies both of which were wholly owned subsidiaries of DLF Limited.

SEBI had sent Sinha’s complaints to DLF asking it to redress his grievances but Sinha moved the Delhi High Court after DLF had denied all the allegations. The High Court had then directed SEBI to investigate the matter.

After investigation and hearing afforded to the parties, SEBI concluded, inter alia, the following:

• – That the purported transfer of shareholding in three companies, Sudipti, Felicite and Shalika were sham transactions devised as a plan, scheme, design and device to camouflage the association of DLF with these three companies as “holding – subsidiary”.
• – Failure by DLF to disclose of “related party transactions” under DIP Guidelines.
• – Non disclosure by DLF of financial details and litigations relating to subsidiaries.

Holding that the violations of the regulations and non disclosure of vital information in the Red Herring Prospectus is of serious nature, SEBI held that,

“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….

….in order to protect the interest of investors and the integrity of the securities market, in exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act, 1992 read with sections 11, 11A and 11B thereof and regulation 11 of the PFUTP Regulations, clause 17.1 of DIP Guidelines and regulation 111 of the ICDR Regulations hereby restrain the following entities from accessing the securities market and prohibit them from buying, selling or otherwise dealing in securities, directly or indirectly, in any manner, whatsoever, for the period  of three years:

1.  DLF Limited

2.  Mr. K. P. Singh

3.  Mr. Rajiv Singh

4.  Mr. T. C. Goyal

5.  Ms. Pia Singh

6.  Mr. Kameshwar Swarup

7.  Mr. Ramesh Sanka”

Senior Advocate Janak Dwarkadas and Amarchand Mangaldas Managing Partner Shardul Shroff appeared for DLF, TC Goyal and Ramesh Sanka. Senior Advocate JJ Bhat and Shardul Shroff appeared for KP Singh, Rajiv Singh and Pia Singh while J. Sagar Associates Partner Somshekhar Sundaresan and Paras K Parekh represented GS Talwar and Kameshwar Swarup.

In the 2007 IPO, AZB & Partners had acted as the domestic counsel for DLF while White & Case LLP had acted as the international counsel. Luthra & Luthra was the counsel for the Book Runners while the Underwriters were advised by Linklaters LLP. Amarchand Mangaldas acted as special legal counsel to the issue.

Read the SEBI order below.

Image taken from here.