Delhi HC notice to Sebi, StanChart in DLF case

The petitioner, a shareholder, has sought a probe into Sebi's handling of DLF's fund-raising

The high court here has issued notices to the Securities and Exchange Board of India (Sebi) and Standard Chartered Bank on a petition filed by a shareholder of realty giant DLF.

Ved Prakash Gupta, the shareholder, has sued the regulator for allowing DLF to raise funds in 2013 despite having found it guilty of disclosure deficiencies in the initial public offering (IPO) of 2007.

“The court wanted to know whether Sebi had applied its mind on the petition or not. Therefore, it asked Sebi to file a written reply in two weeks,” said Ashish Kumar, lawyer for Gupta. StanChart was lead merchant banker to the stake sale in May 2013, when it raised  Rs 1,860 crore through an institutional placement programme.

The lawyer said Sebi, represented by Additional Solicitor General Sanjay Jain, pleaded for including DLF as a party in the matter. However, the court did not agree after hearing the petitioner's contention that his grievance was against the regulator's conduct.

This is a new headache for Sebi, which has had several of its officials being probed by agencies such as the Central Bureau of Investigation. These are for alleged irregularities in investigations into the Saradha group, Bank of Rajasthan and the MCX Stock Exchange. “Usually and as per propriety, Sebi passes interim orders restraining companies from accessing the capital market when a prima facie case is made out against them but in this case, it gave approval to raise further capital from the public/institutions when the Sebi had itself concluded the investigation qua the IPO of 2007 in the third week of April 2013 and prior to the filing of DRHP (Draft Red Herring Prospectus) dated April 29, 2013,” Gupta said in his petition.

Last October, Sebi passed the final order in the matter of inadequate disclosure in the 2007 IPO, by barring DLF and its key executives from the capital market. DLF was found guilty of not disclosing a dispute with a Kimsuk Krishna Sinha over a property in a Gurgaon village. Though Sebi had initially not taken action on Sinha's complaints, it had to initiate an investigation after a Delhi HC order. DLF has challenged the October order before the Securities Appellate Tribunal in Mumbai, where it has referred to Sebi’s decision to allow its 2013 fund raising.

Gupta has argued in his petition that "it is normal procedure within Sebi, that on receiving application and the prospectus, comments of all internal departments are invited and had it been done, the DLF Ltd would not have been allowed raise funds so casually through IPP".