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The Securities Appellate Tribunal (SAT) on Friday quashed a Securities and Exchange Board of India (Sebi) order against realty firm DLF, lifting a capital markets ban on the company’s promoters and related entities. The case relates to alleged non-disclosure of information by the company during its initial public offering (IPO) in 2007, which had garnered about Rs 9,000 crore.
In October 2014, Sebi had banned DLF and its key officials from accessing the capital markets for three years.
Welcoming the SAT order, the company said, “DLF and its board were guided by and acted on the advice of eminent legal advisors, merchant bankers and audit firms, while formulating its offer documents in 2007. We have full faith in the judicial system and we always abide by its order.”
Following the SAT decision, shares of the company soared nine cent on Friday, before closing slightly lower at Rs 157.50, up 5.74 per cent compared to the previous close.
Following the Sebi ban, the stock had dropped to as low as Rs 105.
While SAT members Jog Singh and A S Lamba favoured quashing the ban, presiding officer J P Devadhar didn’t agree. “According to the majority decision, the impugned order dated October 10, 2014, is quashed and set aside and all appeals are allowed, with no order as to costs,” said the SAT order.
In October 2014, Sebi had banned DLF and its key officials from accessing the capital markets for three years.
Welcoming the SAT order, the company said, “DLF and its board were guided by and acted on the advice of eminent legal advisors, merchant bankers and audit firms, while formulating its offer documents in 2007. We have full faith in the judicial system and we always abide by its order.”
Following the SAT decision, shares of the company soared nine cent on Friday, before closing slightly lower at Rs 157.50, up 5.74 per cent compared to the previous close.
Following the Sebi ban, the stock had dropped to as low as Rs 105.
While SAT members Jog Singh and A S Lamba favoured quashing the ban, presiding officer J P Devadhar didn’t agree. “According to the majority decision, the impugned order dated October 10, 2014, is quashed and set aside and all appeals are allowed, with no order as to costs,” said the SAT order.
Devadhar favoured reducing the three-year capital markets ban to six months, along with a stay on the majority decision for four weeks. “We find no good reasons to stay the majority decision quashing the impugned order. Since the appellant has already suffered for the past five months for no fault, the prayer for a stay on the majority decision is, therefore, not allowed,” said the SAT order.
While banning the company from the capital markets, Sebi had alleged the company had deliberately withheld information from its IPO investors about a first information report filed by a Kimsuk Krishna Sinha against the company. Sinha claimed a subsidiary of DLF had cheated him of Rs 34 crore.
“There are very few instances of the presiding officer in a tribunal being overruled by other members, technical members. We are going through the order and are likely to appeal against it in the Supreme Court,” said Rajneesh Chopra, counsel for Sinha.
Sebi, too, can move the Supreme Court against the SAT order.
In its order, SAT chastised Sebi for the loss caused to investors following the order of the markets regulator, terming it a case of "over-regulation" by Sebi. "The jumbling up of rules, regulations and various provisions occurring and operating in different fields by the respondents (Sebi) in the impugned order has led to a grave miscarriage of justice in the present case, inasmuch as the investors have suffered a loss to the tune of thousands of crores in the capital market on the day following the passing of the order," said the order.
In the same case, Sebi had also imposed a penalty of Rs 86 crore on DLF and related entities in February. While a DLF spokesperson declined to comment on the status of that, a Sebi spokesperson did not immediately respond to a request for comment.
DLF’S NINE-YEAR SAGA
May 11, 2006: DLF files first DRHP with Sebi
Jan 2, 2007: DLF files second DRHP after dissociating 281 associates and subsidiary companies
June 11-14, 2007: IPO opens for subscription
June 4, 2007: K K Sinha files complaint before Sebi; mentions FIR, alleges he was duped of Rs 34 crore
July 5, 2007: Shares listed
October 29, 2007: Sinha files writ petition, requesting courts to ask Sebi to look into matter
July 21, 2011: Delhi High Court asks Sebi to consider investigating the matter
June 25, 2013: Show-cause notice issued
January 15, 2014: Proceedings before Sebi member closed
October 10, 2014: Final order passed, barring company and key executives for six months for irregularities in IPO disclosures
November 5, 2014: SAT allows DLF to access Rs 1,800 crore in mutual fund money
December 18, 2014: Supreme Court asks SAT to hear K K Sinha
Feb 26 2015: Sebi imposes Rs 86-crore penalty on DLF, related entities
March 13, 2015: SAT upholds DLF appeal, overturns ban
