In a major relief to KP Singh-led DLF, the Securities Appellate Tribunal (SAT) on Friday quashed an earlier order by the Securities and Exchange Board of India (Sebi) that had barred the real estate major from accessing the capital markets, on grounds of misrepresenting information in a public offer.
The news sent DLF shares up 10% during intra-day trade on the BSE, before ending at Rs 157.50, a gain of 6%.
Sebi’s orders imposing similar ban on DLF’s six top executives, including chairman KP Singh and his children Rajiv Singh and Pia Singh, were also set aside by the same majority order.
SAT reduced to just six months, Sebi’s earlier ban on DLF, which had barred the company for three years.
Rejecting the October 2014 Sebi order, a majority view of the SAT ruled that the order against DLF was a case of “over regulation” in the capital markets and that “Sebi is not justified in holding DLF and its directors guilty of violating norms.”
SAT’s ruling came following an appeal filed by DLF against the Sebi order. Although Sebi did not respond to queries, lawyers for the regulator said Sebi could likely appeal against the SAT order in the Supreme Court.
Friday’s ruling by SAT will now enable DLF to raise funds to pare down its debt, which had totalled Rs 20,000 crore in December 2014. In 2007, it raised around Rs 9,188 crore, in what was one of the biggest IPOs till then.
”DLF and its board were guided by and acted on the advice of eminent legal advisers, merchant bankers and audit firms while formulating its offer documents in 2007. We have full faith in the judicial system and will always abide by its order,” DLF said in a statement.
Acting on a complaint, Sebi had last October, banned DLF’s promoters and some key officials from accessing the capital markets, saying that the company had withheld material information during the initial public offering of shares in 2007.
“It is a majority view that sets aside the earlier order by Sebi,” said senior advocate Janak Dwarkadas, who represented DLF. The SAT judgment also said that the regulator cannot import the definitions of control and fraud in the case, while adding that Sebi had full knowledge of the disassociation of the three subsidiary companies of DLF, which were part of 281 such companies and therefore cannot complain that these were non-disclosures of information as the regulator had already approved the prospectus.
Last month, Sebi had imposed a penalty of Rs 86 crore on DLF and some related entities citing unfair trading practices. Apart from penalising DLF Rs 26 crore and its top officials Rs 26 crore, another 35 entities were fined Rs 34 crore for irregularities and non-disclosure violations in the IPO.