Sebi Bans DLF, Top Executives from Capital Markets for Three Years

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Sebi Bans DLF, Top Executives from Capital Markets for Three Years
India's largest real estate player, DLF, has been barred by the capital market watchdog, SEBI as well as its six top executives, including chairman and main promoter K P Singh, from the securities market for 3 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.

On its part, DLF said in a late night statement the order dated October 10 came to its notice only today and the same is being reviewed by DLF and its legal advisors.

"DLF has full faith in the judicial process and is confident of vindication of its stand in the near future," the statement said.

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 also 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 prohibition 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.

DLF had debt of more than Rs 19,000 crore as on June 30, 2014, while its already-proposed fund raising plans include nearly Rs 3,500 crore through issue of certain bonds.

This is one of the rare orders by SEBI where it has barred a blue-chip firm and its top promoter/executives.

DLF is the largest real estate group in the country with nearly Rs 10,000 crore annual turnover and market value of over Rs 26,000 crore. Its market cap had crossed Rs one lakh crore mark soon after its listing in 2007, but fell later.

DLF's IPO in 2007 had fetched Rs 9,187 crore -- the biggest IPO in the country at that time.

"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," the statement said.

The company and its board were guided by and acted on the advise of eminent legal advisors, merchant bankers and audit firms while formulating its offer documents, it said.

"DLF will defend itself to the fullest extent against any adverse findings and measures contained in the order passed by SEBI," the statement said.

In its order, the capital market watchdog 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".

The company and its top executives have been 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 percent stake of DLF, which has been finding itself in regulatory crosshairs often in recent times, including action from fair trade regulator CCI. The company has been slapped with a penalty of Rs 630 crore by 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 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 it employed "a plan, scheme, design and device to camouflage the association" of the company 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".

While Singh, his two children and Goyal are still on the board of DLF, Sanka is no more with the group.

"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 said.

DLF shares fell sharply on Monday and is expected to open lower today.

With inputs from PTI

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