Sebi probes allegation against DLF

Last Updated: Thu, Oct 20, 2011 19:41 hrs

The capital market regulator is investigating whether an associate company of DLF duped an investor by using a maze of intermediary companies while purchasing land. The Delhi High Court had directed the Securities and Exchange Board of India (Sebi) to investigate the issue.The regulator will further probe whether DLF violated norms by not disclosing the same while filing the revised draft document in 2007.

The development comes on the back of a complaint by Kimsuk Krishna Sinha, alleging that Sudipti Estates Private Limited, an associate company of DLF, duped him of Rs 34 crore. It is alleged that Sudipti along with its directors/agents compelled the complainant to transfer a part of his land and then failed to develop the same and generate higher returns, as promised. They further cheated by not delivering the property nor returning the money.

A first information report (FIR) has already been lodged in the matter, while the Delhi High Court, based on the complaint, has directed the Sebi to investigate the matter.

“The Securities and Exchange Board of India shall investigate into the allegations levelled by the complainant, Mr. Kimsuk Krishna Sinha in respect of DLF Limited and Sudipti Estates Private Limited,” said the Sebi order by whole time member Prashant Saran. A formal order will be issued after appointing an investigating authority, it added.

Interestingly, when DLF, which was earlier known as DLF Universal, filed a draft red herring prospectus (DRHP) in May 2006, it had mentioned Sudipti Estates Private Limited as an associate company. The document was later withdrawn and thereafter a fresh DRHP was filed in January 2007 in which Sudipti was not mentioned as being associated with it.

“Having considered the submissions and the fact that the first DRHP (filed in May 2006) was withdrawn and a fresh DRHP was filed in January 2007 after the sale of stake in Sudipti, an examination is required as to whether Sudipti was dissociated for the purpose of avoiding any relevant disclosures that could arise if the entity continued to be part of the DLF group,” noted the Sebi order.

Having prima facie observed that the company (DLF) was aware of the FIR registered against Sudipti, it is to be ascertained whether there was a duty on the part of the company to disclose the same in the prospectus, it added.

The Sebi order has also highlighted the complainant’s allegation that DLF used Sudipti along with a maze of intermediary companies to purchase land which formed part of the land bank disclosed in the DRHP, but did not disclose anything about the transaction or about Sudipti.

Meanwhile, the counsel for the company has contended that the requirement under Sebi's disclosure guidelines was only to disclose ‘litigation’ and according to him, the FIR cannot be treated as litigation.

The Sebi order has, however, noted that “no guilt, if any, can be fastened on the company (DLF), at this stage, on the basis of the said documents without obtaining the submissions of the company and Sudipti in that regard”.

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