DLF Limited (hereinafter referred to as "DLF") came out with an Initial Public Offer ("IPO") in the year 2007 for issuance of 17,50,00,000 equity shares of Rs. 2 each at a price of Rs.525 per equity share aggregating to Rs.9187.5 crore. Order issued on 10th
Facts of the case :
With regard to the above IPO of DLF, one Delhi- based business man Mr. Kimsuk Krishna Sinha ("Mr. Sinha") had filed two complaints with SEBI on June 4, 2007 and July 19, 2007. In his first complaint, Sinha stated that Sudipti Estates Private Limited and certain other persons had duped him of Rs 34 crore in relation to a transaction between them for purchase of land, and he had also registered an FIR against Sudipti, one Praveen Kumar and others in that regard.
He also stated that Sudipti had only two shareholders, namely, DLF Home Developers Ltd (DHDL) and DLF Estate Developers Ltd (DEDL), both wholly owned subsidiaries of DLF. Sinha further alleged that Sudipti, DHDL and DEDL were sister concerns and are inextricably linked and these companies are a part of the DLF group.
In his second complaint, Sinha said DLF was denying its or its subsidiaries' connection with Sudipti at that point of time. He, however, claimed that DLF's claim of not having any association with Sudipti was false.
When asked by Sebi, DLF denied the allegations. Not being satisfied with the response provided by DLF, Sinha filed a Writ Petition before Delhi High Court, which asked Sebi to probe the matter in April 2010.
After looking into further appeals by Sudipti and DLF, the High Court passed another order in July, 2011 directing Sebi to examine the matter. Subsequently, Sebi ordered a probe into the allegations made by Sinha in his two complaints of 2007.
SEBI’s finding’s :
The company and its executives failed to disclose the transactions of three of its subsidiaries— Sudipti, Shalika
and Felicite -
the aim of which appears to have been to distance themselves from the entities to which they sold stakes of three other companies. Incidentally, the ultimate beneficiaries of these stakes were the wives of key management personnel of DLF—who had purchased the shares using money from joint accounts with their husbands, leading the regulator to conclude that the process of transferring the shares of its three subsidiaries was ‘through sham transactions’ and that those involved employed a “plan, scheme and device to camouflage the association of DLF with its three subsidiaries”. In terms of the provisions of DIP Guidelines and AS-23, names of these subsidiary companies should have been disclosed in the RHP/Prospectus of DLF, which it has failed to do.
The Company has employed a scheme by camouflaging the association of Sudipti
with DLF as dissociation. They have failed to ensure that the RHP/Prospectus contained all material information which is true and adequate, so as to enable the investors to make an informed investment decision in respect of the issue. The Company has actively and knowingly suppressed several material information and facts in the RHP/Prospectus leading to misstatements in the RHP/Prospectus so as to mislead and defraud the investors in securities market in connection with the issue of shares.
Therefore, the charge of violation of provisions of section 12 A(a), (b) and (c) of SEBI Act read with regulations 3 (a), (b), (c), (d) 4(1), 4(2)(f) and (k) of PROHIBITON OF FRADULENT AND UNFAIR TRADE PRACTICES Regulations against the Noticees is also established.”
SEBI member Mr. Rajeev Kumar Agarwal also stated in his order that “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. 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.”
“Considering the above, in order to protect the interest of investors and the integrity of the securities market, in exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act, 1992 read with sections 11, 11A and 11B thereof and regulation 11 of the Prohibition of Fraudulent and Unfair Trade Practices Regulations, clause 17.1 of DIP Guidelines and regulation 111 of the ICDR Regulations hereby restrain the following entities from accessing the securities market and prohibit them from buying, selling or otherwise dealing in securities, directly or indirectly, in any manner, whatsoever, for the period of three years:
||Name of Entity
||Mr. Rajiv Singh
||Mr. T.C. Goyal
||Mr. Kameshwar Swarup
||Mr. Ramesh Sanka