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DLF to pay hefty fine for failure to comply with Sebi summons

The regulator had asked for shareholding pattern of Sudipti Estates since 2005 and the company's other filings with the registrar of companies

Read more on:    Dlf | Sebi | Fine | Shareholding Patterns
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Realty major Ltd. may have to pay a of Rs 5 lakh on a per day basis to the Securities and Exchange Board of India (), following Delhi High Court's (HC) dismissal of its plea on November 20. The fine is applicable since November 5, as the court dismissed DLF's plea against Sebi's decision to probe into company's faulty disclosures during its initial public offer (IPO).

Sebi had issued a summons to DLF to provide information and documents, to carry out preliminary investigations as per court order, into the company's alleged faulty disclosures during its over Rs 9,000 crore IPO in 2007. The deadline to comply with the summons was November 5. DLF will have to pay the fine till they submit the documents asked by Sebi.

The Delhi HC in 2011 had directed Sebi to conduct such a probe after it was alleged by Delhi-based businessman Kimsuk Krishna Sinha that DLF had intentionally made a false statement that it had no association with Sudipti Estates, one of its subsidiary against which a criminal case was filed. In a criminal complaint registered with Delhi police, Sinha had alleged that he was duped of Rs 34 crore by DLF and Sudipti Estates.

The regulator had asked for shareholding pattern of Sudipti Estates since 2005 and the company's other filings with the registrar of companies. Also, details regarding the board of directors of Sudipti were sought by Sebi.

Sinha had alleged Sudipti, DLF Home Developers Ltd and DLF Estate Developers Ltd were sister concerns inextricably linked and were part of the DLF group. DLF in its filing had, however, said that Sudipti is a separate legal entity owned and controlled by different individuals. The company in DRHP filed for a public issue in May 2006, had mentioned that Sudipti was its associate company but withdrew it. Later, in a fresh filing in January 2007, DLF did not mention Sudipti as an associate.

DLF had earlier moved the single judge-bench to quash SEBI's order. DLF had said SEBI's order was passed "erroneously and in blatant violation of the principle of natural justice." The single judge on 3rd January this year had dismissed DLF's plea against the market regulator's decision saying SEBI's order was "based on reasons." Following this, DLF approached a division bench of Delhi HC.

The division bench on Tuesday ruled that "it is not for the High Court to second-guess the reasoning of Sebi, as long as a deferential review does not reveal any extraneous circumstances. On this aspect too, this court is of opinion that the findings of the learned single judge do not call for interference. The result of the above discussion is that all the three points are held against the Appellant, DLF. The appeal has to therefore fail; it is dismissed without any order on costs."

Advocate Soli Sorabjee was appearing for DLF.

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