DLF Penalised – IPO disclosure case: Sebi imposes Rs 85-crore penalties

Feb 26, 2015 - 11:36 am EST @theindpanorama Business & Economics, Other News, World 0

MUMBAI: In its biggest-ever penalty, the Securities and Exchange Board of India (Sebi) imposed fines of Rs 52 crore on realty giant DLF and seven others, including Chairman K P Singh, for “fraudulent and unfair trade practices”, while penalties totalling Rs 33 crore were slapped on 33 related entities.

These orders come after Sebi in October last year barred DLF and its six top executives from markets for three years for suppressing key information at the time of its IPO in 2007, including about certain “sham transactions”

While the earlier order did not involve any monetary penalties and has been challenged before the Securities Appellate Tribunal, the regulator today passed two fresh orders, penalties totalling Rs 85 crore on as many as 41 entities. Proceedings against one person has been abated because of his death.

As per the first order running into 53 pages, DLF has been asked to pay a fine of Rs 26 crore, while a similar amount has to be paid collectively by seven persons — Chairman K P Singh, his son and Vice Chairman Rajiv Singh, daughter Pia Singh, T C Goyal, Ramesh Sanka, G S Talwar and Kameshwar Swarup.
This itself is the biggest ever penalty imposed by Sebi in a single case, barring the amount asked by the regulator in its ‘disgorgement’ or refund orders in which cases the concerned entities are asked to return the money illegally raised by them.

DLF had raised Rs 9,187 crore in its IPO, the biggest ever till that time. Sebi had began a investigation after allegations were levelled by one Kimsuk Krishna Sinha about DLF and Sudipti Estates Limited (Sudipti), wherein he had alleged that Sudipti had duped him of Rs 34 crore in relation to a transaction between them for purchase of land, and he had registered an FIR against Sudipti.

In its first order, Sebi said that DLF and its Executive Chairman (K P Singh), Vice Chairman (Rajiv Singh), Managing Director (T C Goyal), Whole Time Director (Pia Singh), Executive Director – Legal (Kameshwar Swarup), Director (G S Talwar) and CFO (Ramesh Sanka) were in charge of the affairs of DLF at the relevant time.

“In the instant case… there was suppression of material facts and information by DLF about its subsidiaries in the offer documents (for IPO). Therefore, I find that the disclosures in the offer documents were not true, correct and complete and the certificate given by the Noticees in this regard is false,” Sebi’s Adjudicating Officer said in the order.

“A company being a legal entity cannot act by itself, rather it acts through its directors and officers. As such, directors of the company are expected to exercise utmost care, skill and diligence in all the activities of the company,” he added.

“… I note it has been clearly established herein above that DLF and its top management including Talwar had chosen not to disclose Sudipti, Shalika and Felicite as its subsidiaries, thereby, actively and knowingly suppressed material information in the Offer Documents…

“(This includes)… information regarding related party transactions, financial information pertaining to subsidiaries and outstanding litigation /FIR against Sudipti leading to misstatements in the Offer Documents,” the Officer said.