DLF, KP Singh and five directors barred from markets for three years

SEBI said, the share transfer of Sudipti, Shalika and Felicite was through sham transactions and that DLF and its six directors, including KP Singh, employed a plan, scheme, design and device to camouflage association of DLF with these three units


Market regulator Securities and Exchange Board of India (SEBI) has barred DLF Ltd and its directors including chairman Kushal Pal (KP) Singh from accessing the securities market for three years. SEBI also prohibited them from buying, selling or otherwise dealing in securities, directly or indirectly, or in any other manner.


In an order issued on 10 October 2014, Rajeev Kumar Agarwal, whole time member of SEBI, said, "...the process of share transfer of three subsidiaries of DLF in Sudipti Estates Pvt Ltd, Shalika Estate Developers Pvt Ltd and Felicite Builders & Construction Pvt Ltd was through sham transactions as alleged in the show cause notice (SCN) and that the Noticees employed a plan, scheme, design and device to camouflage the association of DLF with its three subsidiaries, namely, Felicite, Shalika and Sudipti. In this case under such plan, scheme, design and device, the Noticees suppressed several material information in the draft Red Herring Prospectus (RHP)/ Prospectus of DLF and actively concealed the fact about filing of FIR against Sudipti and others. In the facts and circumstances of this case, I find that the case of active and deliberate suppression of any material information so as to mislead and defraud the investors in the securities market in connection with the issue of shares of DLF in its initial public offering (IPO) is clearly made out in this case."


Other than KP Singh, who is the executive chairman of DLF, SEBI barred Rajiv Singh, vice chairman and son of KP Singh, TC Goyal, managing director, Pia Singh, whole time director and younger daughter of the DLF chief, Kameshwar Swarup, executive director for legal, GS Talwar, director and son-in-law of KP Singh and Ramesh Sanka, chief financial officer (CFO) of DLF.


In 2007, Kimsuk Krishna Sinha, a businessman from Delhi had alleged that DLF and its directors and agents had lured and compelled him to transfer certain plots of land and did not fulfil the promise of developing the land and providing him higher returns.


Sinha had alleged that Sudipti, DLF Home Developers Ltd and DLF Estate Developers Ltd, were sister concerns and were part of the DLF group.


DLF, however, said that Sudipti was a separate legal entity, owned and controlled by different individuals. The construction major in its DRHP, filed for a public issue in May 2006, had mentioned that Sudipti was its associate company.


The DRHP however, had been withdrawn and a fresh prospectus was filed in January 2007, in which Sudipti was not mentioned as an associate.


Following a 2011 direction of the Delhi High Court to look into Sinha's complaint against the DLF Group and Sudipti Estates, SEBI passed an order to carry out investigation into the allegations levelled by Sinha.


Here are the undisputed facts, mentioned by SEBI...


a) Prior to 29-30 November 2006, entire shareholding of the three companies, which are Sudipti, Shalika and Felicite, which were incorporated on 26 March 2006, was held by DLF's two or all three wholly owned subsidiaries viz. DEDL, DHDL and DRDL.


b) In the first DRHP filed by DLF on 11 May 2006, which was withdrawn on 31 August 2006, Sudipti, Shalika and Felicite were shown as subsidiaries of DLF.


c) On 29 November 2006, the entire shareholding of DEDL, DHDL and DRDL in Felicite was sold to three persons who were spouses of employees of DLF.


d) On 30 November 2006, the entire shareholding of DEDL and DHDL in Sudipti was sold to Shalika and on the same day the entire shareholding of DEDL, DHDL and DRDL in Shalika was sold to Felicite.


e) On 2 January 2007, DLF filed the second DRHP with SEBI along with a document, which indicated that as a result of the above transfers of shares, DLF's three wholly owned subsidiaries viz. DEDL, DHDL and DRDL were dissociated from Sudipti, Shalika and Felicite and that Sudipti, Shalika and Felicite were not the subsidiaries of DLF as on the date of filing of second DRHP.


f) After receipt of observations from SEBI on the second DRHP, DLF opened its IPO for subscription by issuing the RHP. In the final RHP/ Prospectus, Sudipti, Shalika and Felicite were not disclosed as subsidiaries of DLF.


SEBI's Agarwal, stated in his order, "…the violations as found in this case are grave and have larger implications on the safety and integrity of the securities market. In my view, for the serious contraventions as found in the instant case, effective deterrent actions to safeguard the market integrity are required. It therefore becomes incumbent to deal with contraventions, digression and demeanour of the erring Noticees sternly and take appropriate actions for effective deterrence."



Radhakrishnan Subbiah

3 years ago

To save time & resources for yourself & your trusting readers, won't it be worthwhile to identify & discuss only the transparent businesses in India ? Especially as the bad ones are far more in number. Think about it seriously.


3 years ago

DLF was very clever in shifting the registered office of DLF Cements from Delhi to the plant address in Rajastan so that no shareholder can attend the AGMs. They made big money in the IPO of DLF Cements and sold the plant to Ambuja Cement - in that process, the retail investors lost all the money.

Mutual Fund Costs

I have never purchased units of a mutual fund (MF) scheme. From what I have read, there are various costs involved in a scheme and, most brokers don’t take enough care to move the funds to right portfolios after the initial account creation. Where do I get started?


MLF’s Reply: The only recurring fee you have to pay is deducted from your corpus in the form of expense ratio which can range from 1.5% to 3%pa (per annum) for equity schemes. Transaction charges and fees charged by distributors for additional services would be separate. However, if you choose to invest on your own, without the help of a distributor, the only cost to you would incur will be expense ratio. Enumerated below are details of other fees chargeable by MF schemes.


Transaction Costs: If you purchase mutual fund units through your distributor and if your distributor has opted to levy ‘transaction charge’, then for existing investors, Rs100 will be charged as ‘transaction fee’ per subscription for investments over Rs10,000. For new investors, the charge would be Rs150 for every subscription. If your distributor has opted not to accept transaction charges, or if you invest directly with the fund house, these charges will not apply.


Exit-load: Certain schemes require a minimum investment period which can range from a few days to a few years. If you wish to withdraw before the stipulated period, the scheme imposes an exit-load which could range from 0.50% to 3% of the amount withdrawn.


There are many online websites that help you to choose. Several factors go into selecting a scheme. One needs to look for consistent performance, low expense ratio, portfolio composition, etc. Along with this, you need to look at your investment horizon, current market valuation, age and risk profile before selecting a mutual fund scheme. Brokers have nothing to do with this. You can do it yourself, or take the help of a knowledgeable person.


MF Switch

What is switch in mutual funds?


MLF’s Reply: Switch, in mutual funds, is the transferring of money from one scheme to another scheme of the same fund house. The amount is transferred internally. This saves investors from transferring the amount into their bank account and then reinvesting in another scheme. For example, if the current value of your investment in HDFC Liquid Fund is Rs5,000 and, from this, you would like to invest Rs1,000 in HDFC Equity Fund, you would have to switch Rs1,000 from HDFC Liquid Fund to HDFC Equity Fund.


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