SAT allows DLF to redeem Rs 1806 cr of mutual fund investments

In a major interim relief to DLF, the Securities Appellate Tribunal today allowed the realty giant to redeem mutual funds worth Rs 1,806 crore to meet working capital needs and service debt payments.
DLF had sought permission to redeem money locked in mutual funds after being slapped with market regulator Sebi's ban last month that bars it from accessing the capital market for 3 years.
The final hearing in DLF's main appeal against the Sebi order would commence on December 10, prior to which Sebi and the company will have to file their replies with Securities Appellate Tribunal (SAT).
As an interim measure, SAT has allowed the company to redeem mutual funds worth Rs 767 crore in the current month and further funds worth Rs 1,039 crore in December.

"...Sebi order did not ban DLF from continuing its business, but only barred it from accessing the capital markets for three years," a three-member SAT bench said.
"It can be reasonably concluded that the appellant (DLF) should be allowed to use its own funds to meet its every day needs and other working capital requirements, including meeting its obligations to the creditors.

"Accordingly, this tribunal justifies the demand for the appellant to redeem Rs 1,806 crore from mutual funds and also allow its lenders to de-freeze/invoke the pledged shares of its subsidiaries as and when required," Presiding Officer JP Devadhar said.

Seeking permission to redeem mutual funds, DLF had submitted before SAT a list of 10 subsidiaries that need the cash along with the parent firm, as also the bank details of the funds to be redeemed from the mutual fund investments worth Rs 2,118 crore. Out of this, the company needed Rs 1,806 crore till December.
DLF's counsel submitted that the money was needed as its 10 subsidiaries are not in a position to service their commitments to banks and financial institutions. Due to the peculiar nature of its business, DLF collects all the surpluses from the subsidiaries and has a consolidated bank account.

The tribunal noted that the Sebi counsel Rafique Dada did not object to the interim relief.
Dada said, "Sebi is not opposing the interim relief as it does not want the company to be crippled at the same time, it has to be underlined that the tribunal makes it a point that this case and the interim relief does not become a precedent for others.
"We are not opposing the plea for interim relief presuming that the tribunal is satisfied with the case made out by the appellant and not that we agree with all the points made," Dada said.

To this, Devadhar said, "We want to make it a point that this case sets a paradigm for future Sebi rulings so that it gives out more unambiguous orders.