Sebi bars DLF, six top executives from markets for 3 years

Sebi bars DLF, six top executives from markets for 3 years

Regulator Sebi has barred realty major DLF, as also six top executives including Chairman K P Singh, from securities markets for three years, after finding the company guilty of "active and deliberate suppression" of material information at the time of its public offer.

Those prohibited from the markets including Singh's son Rajiv Singh (Vice Chairman) and daughter Pia Singh (Whole Time Director), Sebi said in its order.

"I find that the case of active and deliberate suppression of any material information so as to mislead and defraud the investors in the securities market in connection with the issue of shares of DLF in its IPO is clearly made out in this case," Sebi's Whole-Time Member Rajeev Agarwal said in his 43-page order.

"I am 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," Agarwal said.

The company and its top executives are found to have violated various regulations including Sebi's Disclosure and Investor Protection (DIP) Guidelines and the PFUTP (Prevention of Fraudulent and Unfair Trade Practices) norms.

As per the order, those facing the ban include T C Goyal (Managing Director),  Kameshwar Swarup and Ramesh Sanka. All of these persons, including K P Singh and his two children, were part of the top management at the time of filing IPO documents.

About G S Talwar, who was also a non-executive director at that time, Sebi said it could not be established whether he was involved in day-to-day operations of the company and and therefore it was giving him "benefit of doubt".
DLF had raised Rs 9,187 crore through its IPO in 2007.

Sebi began its probe after a Delhi High Court order in April 2010, wherein the regulator was asked to undertake an investigation into the complaints made by one Kimsuk Krishna Sinha, who had also filed complaints with Sebi in 2007.

The complaints were mainly related to DLF's dealings with some of its allegedly related entities. Singh family is also a main promoter of the realty giant.

"In this case, I have already found that the process of share transfer of three subsidiaries of DLF in Sudipti, Shalika and Felicite was through sham transactions as alleged in the SCN (Show Cause Notice) and that the Noticees employed a plan, scheme, design and device to camouflage the association of DLF with its three subsidiaries namely, Felicite, Shalika and Sudipti.

"In this case under such plan, scheme, design and device, the Noticees suppressed several material information in the RHP/Prospectus of DLF and actively concealed the fact about filing of FIR against Sudipti and others.

"In the facts and circumstances of this case, I find that the case of active and deliberate suppression of any material information so as to mislead and defraud the investors in the securities market in connection with the issue of shares of DLF in its IPO is clearly made out in this case," Sebi's Whole Time Member said in his order dated October 10, which was released today.

Sebi said that the the DIP Guidelines require that the IPO prospectus should contain 'all material information' which shall be true and adequate so as to enable the investors to make informed decision on the investments in the issue.
Also, "the information should be true and adequate so as to enable the investors to make informed decision on the investments in the issue.

"... In this case, all the information which were not disclosed as found herein above, were material information," Sebi said, while adding that DLF has misled the investors and violated DIP guidelines by "not disclosing material information in the Prospectus and actively concealing them from the prospective investors".
Besides, the "active and known/deliberate suppression of material information and facts in a RHP/Prospectus so as to mislead and defraud the investors in securities market in connection with the issue of shares would be covered" within the PFUTP Regulations, Sebi said.
There was no immediate reply from DLF on Sebi order.

DLF had filed its draft documents with Sebi in January, 2007 for raising funds through an IPO and the regulator gave its go-ahead in May, 2007.
Prior to that, DLF had filed initial papers in May, 2006, for raising funds via an IPO, which was withdrawn by the company. The shares of DLF got listed on BSE and and National Stock Exchange in July 2007.

One Sinha had filed complaints with Sebi stating that Sudipti Estates Private Limited and certain other persons had duped him of about Rs 34 crore in relation to a transaction between them for purchase of land and he had registered an FIR in April 2007 against Sudipti and others in that regard.

He also stated that Sudipti had only two shareholders namely, DLF Home Developers Ltd (DHDL) and DLF Estate Developers Ltd (DEDL).

He further stated that Sudipti, DHDL and DEDL are sister concerns and are inextricably linked and these companies are a part of the DLF group. However, DLF in its reply to Sinha had denied its/ subsidiaries' connection with Sudipti at that point of time.

After not getting satisfactory response from DLF, Sinha had approached Delhi High Court. Accordingly, Court issued directions to Sebi to undertake an investigation into the complaints made him.

Pursuant to the directions of the Court, Sebi in October 2011 ordered an investigation into the allegations levelled by Sinha in his complaints.
Meanwhile, shares of DLF today closed at Rs 146.70 apiece on the BSE, down 3.71 per  cent from the previous close.

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