Tuesday, May 21, 2013

Court Directs Sebi to Speed up Probe into DLF IPO Disclosure

Sebi asked to file reply before July 19 on probe into allegations about co’s links with Sudipti Estates

Capital market regulator Sebi will have to speed up its investigation into the quality of disclosure made by DLF India’s largest real estate developer at the time of its initial public offer (IPO) in 2007.

A division bench of Delhi High Court comprising chief justice D Murugesan and justice Jayant Nath issued a notice to Sebi and asked it to file its reply before July 9. In the course of the hearing, the justices pointed out that Sebi had been probing the matter for 18 months.

In 2011, the Delhi High Court had asked Sebi to investigate allegations by Delhibased businessman Kimsuk Krishna Sinha that the KP Singh-helmed company had intentionally made a false statement that it had no association with Sudipti Estates, against which a criminal case had been filed. Sinha alleged that DLF had not disclosed the fact that Sudipti was a subsidiary in its IPO prospectus.

A DLF spokesperson said they would not comment as the matter is sub judice. Sebi did not respond to an emailed questionnaire.

“Investigations in the matter of DLF IPO are at an advanced stage and a show-cause notice will be issued to the company, if required,” a Sebi official said. He requested anonymity as the investigation was not yet complete.

The non-disclosure is about a case filed by Delhi police, against DLF and Sudipti Estates for allegedly “duping” Sinha of . 34 crore. The case relates to a dispute over payment for land sold by Sinha to DLF and Sudipti. Sinha has alleged that Sudipti, DLF Home Developers and DLF Estate Developers are sister concerns with links to each other and were part of the DLF Group.

The company’s draft red herring prospectus (DRHP), filed for a public issue in May 2006, had mentioned that Sudipti was its associate company. But later, in a fresh filing in January 2007, DLF did not mention Sudipti as an associate.

“The court wants to know why investigations have not been completed and at what stage they are. If Sebi does not provide a concrete reason to further delay its investigations in the matter, the court may set a deadline for it,” said Priyanka Kalra, a lawyer who appeared for Sinha in the case along with senior counsel Amit Sibal.

Last year, Sebi had issued summons to DLF to provide information and documents necessary for it to carry out preliminary investigations, as per the Delhi HC order, into the company’s alleged faulty disclosures during its over . 9,000-crore IPO in 2007.

Maharashtra cadre IPS officer PK Padmanabhan, the executive director at Sebi, heads the investigations department.

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