Two US-based law firms file class action suits against HDFC Bank

Cite failure on bank's part to inform investors about improper internal controls on vehicle loans; outgoing MD Aditya Puri, CEO-designate Sashidhar Jagdishan among ddefendants

US-based Rosen Law Firm and Schall Law Firm have filed class action suits against HDFC Bank alleging misleading public statements and for failing to inform investors about the bank's improper internal controls on vehicle loans. 

The lawsuits, filed in the US District Court Eastern District of New York, named outgoing managing director Aditya Puri, CEO-designate Sashidhar Jagdishan, and company secretary Santosh Haldankar as ‘individual defendants’ and collectively, with the bank, as ‘defendants’.  

Rosen Law filed the suit on September 14 on behalf of investors who purchased HDFC Bank equity between July 31, 2019 and July 10, 2020. Rosen had announced it would file such a lawsuit on September 4, Schall Law Firm also announced such filing on September 8, both for the same period.  

The class action filing on Rosen Law’s website says "throughout the class period, defendants made materially false and misleading statements regarding the bank’s business, operational and compliance policies.” Specifically, the bank “made false and/or misleading statements and/or failed to disclose” that it had “inadequate disclosure controls and procedures and internal control over financial reporting.” 

As a result, HDFC Bank maintained “improper lending practices in its vehicle-financing operations," and thus, the earnings generated from HDFC Bank's vehicle-financing operations were unsustainable.  

"All the foregoing, once revealed, was foreseeably likely to have a material negative impact on HDFC Bank's financial condition and reputation; and … as a result, HDFC bank's public statements were materially false and misleading at all relevant times,” which lead to investors suffering damages.  

The lawsuit pointed out that the bank’s American Depositary Share fell $1.37 per share, or 2.83%, to close at $47.02 per share on July 13 after it was reported in media that the bank was probing its lending practice in the vehicle financing operations involving the unit’s former head Ashok Khanna. Investors who had acquired the shares “at artificially inflated prices during the class period” suffered “significant losses and damages," after the revelation. 

HDFC Bank wasn’t immediately available for comment. The shares of the bank fell 0.94 per cent to close at Rs 1083.25 a piece on BSE.