Sebi imposes Rs 86 cr penalty on DLF

Two new orders passed against real estate major and subsidiaries

The Securities and Exchange Board of India (Sebi) has imposed a total penalty of Rs 86 crore on real estate major DLF and 40 related entities, including subsidiaries and key officials. The matter relates to disclosures made at the time of its Initial Public Offer (IPO) in 2007.

The regulator imposed penalties through two separate orders. One is for a sum of Rs 52 crore on DLF and seven officials. The second order is for Rs 34 crore on Sudipti Estates Ltd and 34 other related entities.

The regulator was investigating a complaint by a K K Sinha. He had alleged being duped of Rs 34 crore in a land deal involving Sudipti Estates, a DLF subsidiary.

Sinha filed a police complaint in this regard. The regulator found DLF had sought to dissociate itself from its subsidiary through ‘sham transactions’. It said DLF had failed to disclose the complaint to investors when it raised Rs 9,187.5 crore by selling shares to them in its 2007 IPO.

“This is a clear case of suppression of material information... depriving the investors of important information at the relevant time. Further, the noticees had acted in a fraudulent manner to the detriment of investors and the market in general and had posed a great threat to the safety and integrity of the market,” said the order against the company and its officials.

The order went on to add that the transactions by which DLF had said it no longer had control over Sudipti were not disclosed to investors. It said DLF had in fact retained control over the companies while giving the appearance of having distanced itself from them.

The second order was passed against the subsidiaries and officials involved in their dissociation from DLF. “The violations by the noticees are grave in nature and posed a serious threat to the safety and integrity of the market,” said the second order. The two orders come after another which barred DLF and key officials from accessing the securities market for three years, in October 2014. An appeal against the order was heard in the Securities Appellate Tribunal. A final order in the appeal is yet to be passed.

DLF did not immediately respond to a request for comment.