SEBI bars DLF, its six senior officials from market for three yrs

The Securities and Exchange Board of India (SEBI) on Monday barred the country’s leading real estate developer DLF Limited and its six top officials, including chairman K P Singh, his son and vice chairman Rajiv Singh and daughter Pia Singh, who is a whole-time director, from accessing the capital market for three years for non-disclosure of legal cases during the company’s initial public offering (IPO) in 2007. The real estate firm and its six top officials won’t be able to buy or sell shares in the capital market for the next three years. “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 whole-time member Rajeev Kumar Agarwal said in his 43-page order. The other DLF officials barred from the market include T C Goyal, managing director, Kameshwar Swarup, executive director (legal) and Ramesh Sanka, CFO. Shares of DLF, which has a market capitalisation of Rs 26,1400000000, fell by 3.71% to Rs 146.70 on the BSE on Monday. In a statement, the company said, “DLF and its board wish to reassure its investors and all other stakeholders that it has not acted in contravention of law, either during its initial public offer or otherwise. DLF and its board were guided by and acted on the advice of eminent legal advisors, merchant bankers and audit firms while formulating its offer documents. DLF will defend itself to the fullest extent against any adverse findings and measures contained in the order passed by SEBI. DLF has full faith in the judicial process and is confident of vindication of its stand in the near future.” As per SEBI’s rules, it is mandatory for companies to disclose all legal cases in the IPO prospectus. However, DLF, which raised Rs 9,1870000000 in 2007, failed to disclose a case involving three of its alleged subsidiaries. SEBI investigated the case relating to DLF’s dealings with some of its allegedly related entities following an order from the Delhi High Court in 2010. According to SEBI, a complaint was filed by a person in 2007 stating that Sudipti Estates Private Limited and certain other persons had duped him of Rs 340000000 in a transaction related to purchase of land. The complainant, identified as Kimsuk Krishna Sinha, said he had registered an FIR at the Connaught Place police station in New Delhi against Sudipti and others. He said Sudipti had only two shareholders — DLF Home Developers Limited and DLF Estate Developers Limited — both companies being wholly-owned subsidiaries of DLF, holding 5000 equity shares each. “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 and the noticees (DLF and six officials) employed a plan, scheme, design and device to camouflage the association of DLF with its three subsidiaries namely Felicite, Shalika and Sudipti,” said the SEBI order. According to SEBI, even after the sale of entire shareholding in Sudipti, Shalika and Felicite by the wholly-owned subsidiaries of DLF, there was no change in the composition of the board of directors of these three companies. The directors in Sudipti, Shalika and Felicite, who were employees of DLF, continued to retain their positions even after the sale of shareholding. These directors were subject to the control of DLF due to their “employee and employer relationship”. Due to this arrangement, DLF was in a position to control the boards of these three companies. “Therefore, it has been alleged that in terms of SAST regulations, these three companies were under the control of DLF even after November 29-30, 2006 i.e. after the date of claimed dissociation. Therefore, Sudipti, Shalika and Felicite were related parties of DLF in terms of AS-18. It has been alleged that DLF has failed to disclose its related party transactions,” SEBI said.