Investigations by the Securities and Exchange Board of India (Sebi) show that DLF Ltd, which raised a little over Rs 9,000 crore through a public issue in 2007, had made inadequate disclosures in its then offer documents.
Sebi sources say their probe shows Sudipti Estates, against which a criminal complaint was registered with the Delhi Police, is part of DLF group. Yet, the company had failed to give details about it in their initial public offering (IPO) prospectus.
DLF has been denying that Sudipti was a group company. A criminal complaint was registered in April 2007 by a New Delhi-based businessman Kimsuk Krishna Sinha, who accused the company of duping him of Rs 34 crore. Sinha, in his petition to the court, had alleged DLF intentionally made a false statement that it had no association with Sudipti Estates, so that details of the criminal complaint stayed hidden from prospective shareholders.
According to Sebi’s investor protection and disclosure guidelines, any company launching an IPO has to disclose all details about criminal or civil cases registered against it or its group companies, in the red herring prospectus (RHP). Sinha had alleged that Sudipti, DLF Home Developers Ltd and DLF Estate Developers Ltd were sister concerns and part of the DLF Group. A DLF spokesperson did not respond to phone calls, a text message and an email on the matter.
Sudipti Estates is a subsidiary of Purandar Estates, which is held by Felicite Builders and Developers. As per Registrar of Companies filing, the shareholding of Felicite Builders and Construction as on Aug 2, 2011
|Shareholders||No. of shares held
(Rs 10 fully paid)
|Pudmaja Sanka wife of (w/o) Ramesh Sanka, former group chief financial officer (CFO) of DLF Ltd. Currently head of Facility Management and Utilities Business of DLF||2,04,000|
|Madhukila Basak w/o Surojit Basak CFO (Homes) in DLF Home Developers Ltd||2,03,000|
|Meenakshi Gupta w/o Adesh Gupta VP (Taxation) DLF Ltd||2,00,000|
|Saroj Khanna w/o Manik Khanna Head Banking at DLF Ltd||2,00,000|
|Ritu Chawla w/o Sourabh Chawla, Executive VP (Finance) at DLF Ltd||2,00,000|
|Mukta Jindal w/o Vipin Jindal Sr. VP (Finance), DLF Ltd||2,00,000|
|Nishi Goyal w/o Atul Goyal CFO, DLF Universal Ltd||2,00,000|
|Sangeeta Gupta w/o Shiv Kumar Gupta Sr. VP (Finance) DLF Ltd||2,00,000|
|Rima Hinduja, w/o Gaurav Monga Former VP (Finance) DLF Ltd||2,00,000|
|DLF Home Developers Ltd||2,03,000|
Documents accessed by Sebi show that Sudipti is a subsidiary of Purandar Estates, which in turn is held by Felicite Builders and Construction. One of the shareholders of Felicite Builders is DLF Home Developers, which is also the original promoter of the company. Spouses of senior executives of DLF and its other arms hold majority stakes in Felicite Builders, a Sebi source said. DLF had named these officials, which hold majority shares in Felicite Builders, as key management personnel in the public issue documents. DLF Home was the original promoter of Felicite Builders but its shares were transferred on November 30, to a group employee's wife. (See Table for top 10 shareholders of Felicite Builders).
A source with Sebi said filings with the registrar of companies (RoC) also show Shalika Estate Developers, the erstwhile holding company of Sudipti, was merged with Purandar Estates with effect from April 1, 2008. But, since Purandar is controlled by Felicite Builders, which is controlled by key management personnel and associates of DLF Group, the beneficiary of the assets of Sudipti Estates should be DLF Group, said the source.
The registered office of Purandar Estates is at Jandewalan Extension, New Delhi, and belongs to DLF Ltd. Many other DLF group companies too, are registered at this address. Further, DLF Utilities Ltd, a shareholder of Purandar Estates, shares its registered office address in Gurgaon with DLF Ltd, the document with Sebi shows.
DLF, in its draft RHP filed for a public issue in May 2006, had mentioned that Sudipti was its associate company but withdrew it and in a fresh filing in January 2007, did not mention Sudipti as an associate.
The court then asked Sebi to investigate if Sudipti was an associate of DLF or not and to ascertain if the company had deliberately dropped this information from the IPO prospectus. Sebi, which sought DLF's filings with RoC as part of its investigation, found out that Sudipti was closely associated with the DLF group.
DLF’s submission in court has been that “between the filing of aforesaid DRHPs, the company (DLF) had disassociated itself from the said companies (Sudipti and its holding companies) due to internal restructuring.” DLF maintained Sudipti was a separate legal entity owned and controlled by different individuals.
Earlier, DLF had moved the single judge-bench to quash Sebi's summons saying it was passed “erroneously and in blatant violation of the principle of natural justice.” The judge on January 3 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, which too ruled in favour of Sebi on November 20.
A top Sebi official said the regulator would take into account the judgement by Delhi HC Judge Vipin Sanghai, who had stated that “there is no dispute to the fact that spouses of key managerial persons of DLF group are shareholders in Felicite Builders”, while passing the order.