Sebi bars DLF, Chairman K P Singh, Vice Chairman Rajiv Singh in IPO disclosure case

Written by PTI | New Delhi | Updated: Oct 14 2014, 02:58am hrs
DLF ipo caseSebi bars DLF, its Chairman K P Singh and Vice Chairman Rajiv Singh, among others, from securities markets for 3 years.
In a major blow to DLF, Sebi has barred the realty major as well as its six top executives, including chairman and main promoter K P Singh, from the securities market for three years for "active and deliberate suppression" of material information at the time of its IPO.

Besides 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 public offer in 2007.

After its over four-year-long probe, Sebi found that a "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."

In his 43-page order, Sebi's Whole-Time Member Rajeev Agarwal said that violations are grave and have larger implications on safety and integrity of the securities market.

While the regulator has not imposed any monetary penalty, the restraining order would bar DLF and the six persons, from any sale, purchase or any other dealings in securities markets for a period of three years, including for raising funds.

Sebi said that all these six persons were part of top management at the time of filing IPO documents, wherein the company was accused of non-disclosure of certain dealings with three subsidiaries through "sham transactions".

DLF's IPO in 2007 had fetched Rs 9,187 crore.

While Singh, his two children and Goyal are still on the board of DLF, Sanka is no more with the company. DLF is the largest real estate group in the country with nearly Rs 10,000 crore annual turnover and market capitalisation of over Rs 26,000 crore. The company's market cap had crossed Rs one lakh crore mark soon after its listing in 2007, but fell later.

The company and its top executives were 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.

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.

DLF did not offer any comments on the order.

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.

Sebi said "the process of share transfer of three subsidiaries of DLF in Sudipti, Shalika and Felicite was through sham transactions" and they employed "a plan, scheme, design and device to camouflage the association" of DLF with these three entities.

"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," Sebi said.

"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 in his order.

About G S Talwar, 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".

"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 order dated October 10, which was released today, said.

DLF shares fell by 3.7 per cent to Rs 146.70 at the BSE.

Sebi said 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.

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.