In a major relief for DlF, the Securities Appellate Tribunal on Friday passed a ‘majority order’ quashing the three-year market ban imposed on the realty giant by regulator Sebi, even as the Presiding Officer dissented.
Sebi’s orders imposing similar ban on DlF’s six top officials, including Chairman KP Singh and his children Rajiv Singh and Pia Singh, were also set aside by the same majority order, passed by two members of the SAT. The SAT Presiding Officer, JP Devadhar, however passed a separate ‘minority’ order, wherein he proposed reducing the ban from three years to six months.
Amid an unprecedented argument between Presiding Officer and one of the Members, Devadhar pronounced another direction for staying the operation of the SAT order for a period of four weeks “in view of the conflicting views in the matter’, but another majority order by the two members again rejected Sebi’s plea for stay on the first ‘majority decision’.
To this, Devadhar suggested that the Supreme Court can decide the matter. In its order dated October 10, 2014, Sebi had barred DlF and six others from the capital markets for three years, alleging “active and deliberate suppression of material facts” during its over Rs9,000-crore IPO more than seven years ago.
While DlF has already gone through five months of debarment, the SAT order will help it tap the markets for raising necessary funds for business, including through REITs and mortgage-backed securities.
Welcoming the order, DlF Executive Director Rajeev Talwar told PTI that any further decision on fund raising from the markets would be taken after the company’s board is apprised of the matter by the legal counsel and experts.
DlF shares soared higher by about 10 per cent immediately after the Sebi order was quashed by SAT. The stock finally closed with a gain of 6 per cent at Rs157.5 at the BSE. In their strongly-worded majority order running into 85 pages, the two SAT Members -- Jog Singh and A S lamba -- ruled that Sebi “has completely failed to approach the issue in the matter pragmatically.
“Viewed from any angle, the impugned order is like a troubled sea whose waters only cast up mire and dust and, therefore, the same is liable to be quashed and set aside.”
They also pulled up Sebi for lapses in its investigation into the case, while stating that it was the job of merchant bankers to ensure proper disclosures in IPO documents.
The order also said DlF suffered huge losses, to the tune of thousands of crores of rupees, in its market value after Sebi’s ban, and therefore such directions could not be seen as those aimed at protecting the investors’ interest.
It also questioned a ‘somersault’ done by Sebi after seven years of the IPO and said the entire case was based on a complaint filed by a person with ‘vested interest’.
Sebi can challenge the SAT order in the Supreme Court.The Presiding Officer, in his 134-page minority order,however said that Sebi’s decision that “DlF has resorted to sham transaction of divesting shares of Felicite, Shalika and Sudipti with a view to camouflage association of DlF with those three companies as dissociation cannot be faulted.
He also ruled that it was necessary for Sebi “to send stern message to DlF and other listed companies by taking remedial action” to ensure that such dubious methods are not adopted hereafter, including by way of resorting to sham transactions.
Devadhar, however, observed that the Sebi order was held to be partially unsustainable and there were “several mitigating factors in favour of the appellants”, and therefore he was reducing the ban to six months, commencing from the date of the Sebi directive (October 10, 2014).
After pronouncement of the order, Devadhar suggested that the majority direction be stayed for a period of four weeks, because of conflicting views. Jog Singh, however, objected and said that the Presiding Officer can stay his own minority view, to which Devadhar said the matter should then be decided by the apex court.
However, these arguments were not recorded in the written order from SAT, which ended with Devadhar’s minority direction for a four-week stay on the Tribunal’s majority order quashing the Sebi order against DlF. SAT had reserved its order last month on appeals filed by DlF and others.