MUMBAI: The Securities and Exchange Board of India (SEBI) in an order barred DLF, India’s biggest real estate developer, and six of its top officials from accessing securities markets and also buying, selling or dealing in securities in any manner directly or indirectly for a period of three years with immediate effect, after finding the company guilty of “active and deliberate suppression” of material information at the time of its public offer (IPO).
SEBI’s order names K P Singh (executive chairman), Rajiv Singh (vice chairman), T C Goyal (managing director), Pia Singh (whole time director), Kameshwar Swarup (executive director - legal) and Ramesh Sanka (chief financial officer), in addition to the company DLF.
The order could affect DLF’s plans for Real Estate Investment Trusts (REITs) as also plans to raise capital to fund expansion in a growing economy and also to reduce its large debt.
The order follows a complaint by Kimsuk Krishna Sinha against DLF and one of its subsidiaries Sudipti Estates. Sinha had in complaints with SEBI in June 2007 alleged that Sudipti Estates had cheated him of Rs 34 crore in a land transaction.
Sudipti had only two share holders DLF Home Developers and DLF Estate Developers. The three companies were sister concerns and DLF, which directly or indirectly controlled the subsidiaries, failed to disclose ‘related party transactions’ facts. The complainant alleged that Sudipti and the officials involved knowingly suppressed facts from the prospectus leading to mis-statements in the red herring prospectus at the time of DLF’s share sale. SEBI was directed by the Delhi High Court in April 2010 to investigate.
DLF’s IPO in 2007 had fetched Rs 9,187 crore.
“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,’’ Rajeev Kumar Agarwal, whole-time member of SEBI 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”.
The company and its executives violated several of SEBI’s rules including Prevention of Fraudulent and Unfair Trade Practices (PFUTP) norms, and Disclosure and Investor Protection (DIP), SEBI said.
DLF didn’t comment on the order. “I, therefore, find that the purported transfers of shareholding in the said three companies were sham transactions devised as a plan, scheme, design and device to camouflage the association of DLF with these three companies as holding -subsidiary,’’ SEBI said.
“In this case under such a 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.’’