DLF: Sebi says housewives, SAT rules women entrepreneurs

Probing DLF, regulator Sebi found 'three housewives' were used as fronts in the group's alleged "sham transactions", but Securities Appellate Tribunal today ruled 'women entrepreneurs' cannot be condemned in this manner.
In another interesting takeaway from this high-profile case, the Tribunal has said in its two-member majority order that Sebi "cannot suddenly be allowed to take a somersault after 7 years and come to a contrary view, particularly, at the instance of a complainant who had his own vested interest in the matter, and was not a share-holder of DLF or even an investor in the IPO or in the capital market in general."

It was an individual complainant, seeking action against Rs 34 crore he was allegedly duped, and "sham transactions" involving three 'housewives' that led to regulator Sebi coming hard in October last year on the country's biggest real estate developer DLF and its six top executives.
The order was today quashed by SAT through a majority order, although the Tribunal's Presiding Officer passed his separate minority order, wherein he reduced the capital market ban on DLF and six others from three years to six months.
As per the majority order, the Sebi order also led to "a grave miscarriage of justice in the present case, in as much as the investors have suffered a loss to the tune of thousands of crores of rupees in the capital market on the day following the passing of the order making it a case of over-regulation.

"This is certainly not the objective of conferring wide discretionary powers upon Sebi," the two SAT Members said, who also questioned the definition of 'control' used by Sebi in its order and said there was a difference between 'Key Managerial Personnel' and 'Key Management Personnel' (KMP).

With regard to Sebi's charges that 'sham transactions' were done through three entities named Sudipti, Felicite and Shalika while using as fronts the 'three housewives', who were spouses of three KMPs, the SAT members said, "We do not find any legal infirmity in purchasing equity stakes by the three women entrepreneurs by utilizing the funds from the joint accounts in question.

"It is trite law that joint account holders have equal rights to the money in the joint account and, hence, the three spouses cannot be condemned for utilizing the money from the joint accounts just by virtue of being housewives.
"No legal bar has been pointed out by the '2nd WTM (Whole Time Member)' in any law debarring women entrepreneurs from utilizing the money from joint accounts held with their husbands for investment purposes.
"Similarly, loans were obtained from the bank legally by the three ladies and no concurrence of a third agency was required for this purpose.