DLF seeks interim relief from ban; next SAT hearing on Oct 30

DLF seeks interim relief from ban; next SAT hearing on Oct 30

DLF seeks interim relief from ban; next SAT hearing on Oct 30

Barred by Sebi from accessing capital markets, realty giant DLF today sought interim relief from Securities Appellate Tribunal (SAT) to allow it to redeem funds locked in mutual funds and other instruments.

After hearing the petition filed by India's largest realty developer last week against the ban, SAT Presiding Officer J P Devadhar adjourned the matter to October 30, and sought response from the capital markets regulator on DLF's plea for an interim relief.

Pleading for relief, the Delhi-based realtor said it needs to redeem funds, including around Rs 2,000 crore locked in mutual funds as also through redemption of some bonds worth thousands of crores, but the Sebi has restrained it and six others including top executives from tapping capital markets for three years.

DLF had received shareholders approval last month to raise up to Rs 5,000 crore through non-convertible debentures.

The full SAT Bench headed by Devadhar and comprising members Jog Singh and A S Lamba, wanted response from Sebi by this afternoon itself to consider any interim relief. However, the regulator's counsel Jamshed Cama said his client's offices are closed for Diwali holidays.
Devadhar observed that Sebi, while passing its order, should have envisaged the impact of its regulatory actions on the investors, who have lost more than Rs 7,500 crore of their wealth following the unprecedented ban imposed last week.

"What were you doing all these seven years and when the company applied for IPO way back in 2007? Why didn't you envisage the impact of your actions on the investors as they have lost more than Rs 7,500 crore of their wealth even as you try to be a world class regulator?" Devadhar told Cama.
To this, the Sebi counsel said if DLF were to be believed, they did not disclose information about three subsidiaries (Sudipti, Shalika and Felicite) during IPO launch arguing that they were of no material value.
Sebi also questioned DLF's decision to allow wives of senior executives to remain invested in those companies.

Describing the October 13 Sebi action as a "death warrant and not a ban from the market, senior DLF counsel Janak Dwarakadas said there was no precedent wherein with one single stroke the watchdog's action, instead of protecting the investors, led to a decline of Rs 7,500 crore in m-cap.

The DLF counter tanked a whopping 28 per cent on the stockmarket on October 14, wiping out over Rs 7,500 crore of investor wealth. During intra-day trading, the DLF stock had plunged close to 40 per cent.

The DLF counsel also opposed the bid to file an intervention petition at SAT, a quasi-judicial body, by Kimsuk Sinha, on whose complaint the Delhi High Court had directed Sebi to probe the case related to alleged suppression of certain information in the company's IPO prospects.

"What is your locus standi to intervene at this stage when you chose to keep away during the 10-month long adjudication process at Sebi? Why do you need to be party when your police complaint has already been closed? Why did you pay Rs 34 crore that too in cash on a verbal assurance from the DLF Director?" Dwarakadas said opposing Sinha's plea.

Following this, the tribunal declined to admit the plea and said Sinha would be heard only after DFL and Sebi conclude their arguments. SAT also asked Sinha's counsel to submit a copy of the original FIR filed by his client.

Dwarakadas said Sebi did not bother to check the revised IPO filing, which clearly mentioned that all its 357 subsidiaries and associate companies had been merged. He cited the "track changes" mode alterations in the IPO filing on page 566 of the DRHP which clearly mentioned the deletion of all these entities.

He also questioned Sebi's move to pick only these three arms (Sudipti, Shalika and Felicite), which according to him had no material value to the company or its investors.
Sebi has barred DLF, its Founder-Chairman K P Singh and five top officials from the capital markets for three years for "active and deliberate suppression" of material information at the time of its IPO in 2007.

The public issue had fetched Rs 9,187 crore, becoming the biggest IPO in the country at that time.
While the regulator did not impose any monetary penalty, its barred DLF and the six persons from any sale, purchase or other dealings in securities markets for a period of three years, including for raising funds.

This was one of the rare orders by Sebi where it prohibited a blue-chip firm and its top promoter/executives from tapping capital markets.

DLF had debt of over Rs 19,000 crore as on June 30, 2014, while its proposed fund raising plans include Rs 3,500 crore through issue of certain bonds to replace costlier debt. The company has annual turnover of nearly Rs 10,000 crore.

In his 43-page order, Sebi Whole-time member Rajeev Agarwal had said the violations are grave and have larger implications on safety and integrity of the securities market.

Besides Chairman K P Singh, those barred from the markets include his son Rajiv Singh (Vice-Chairman), daughter Pia Singh (Whole-time Director), Managing Director T C Goyal, former CFO Ramesh Sanka and Kameshwar Swarup, who was ED (Legal) at the time of the company's initial share sale.

Reacting to the ban, DLF had said it has not violated any laws and would defend its position against any adverse findings in the order. "DLF has full faith in the judicial process and is confident of vindication of its stand in the near future," it had said.

The company and its top executives were found to have violated various regulations, including Sebi's disclosure and investor protection guidelines and the PFUTP (Prevention of fraudulent and unfair trade practices) norms.

The Singh family and related entities are major promoters with 74.91 per cent stake of DLF, which has been finding itself in regulatory crosshairs often in recent times, including action from fair trade regulator CCI.

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 Kimsuk 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--Sudipti, Shalika and Felicite, which Sebi termed as "sham transactions" and employing "a plan, scheme, design and device to camouflage the association" of DLF with these three entities. 

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