BS reported that the capital market regulator is investigating whether an associate company of DLF duped an investor by using a maze of intermediary companies while purchasing land. The Delhi High Court had directed the Securities and Exchange Board of India to investigate the issue. The regulator will further probe whether DLF violated norms by not disclosing the same while filing the revised draft document in 2007.

The development comes on the back of a complaint by Mr Kimsuk Krishna Sinha, alleging that Sudipti Estates Private Limited, an associate company of DLF, duped him of INR 34 crore. It is alleged that Sudipti along with its directors agents compelled the complainant to transfer a part of his land and then failed to develop the same and generate higher returns, as promised. They further cheated by not delivering the property or returning the money.

A first information report has already been lodged in the matter, while the Delhi High Court, based on the complaint, has directed the SEBI to investigate the matter.

The SEBI order by whole time member Mr Prashant Saran said that "The Securities and Exchange Board of India shall investigate into the allegations leveled by the complainant, Mr Kimsuk Krishna Sinha in respect of DLF Limited and Sudipti Estates Private Limited."

Interestingly, when DLF, which was earlier known as DLF Universal, filed a draft red herring prospectus in May 2006, it had mentioned Sudipti Estates Private Limited as an associate company. The document was later withdrawn and thereafter a fresh DRHP was filed in January 2007 in which Sudipti was not mentioned as being associated with it.

The SEBI order noted that "Having considered the submissions and the fact that the first DRHP filed in May 2006 was withdrawn and a fresh DRHP was filed in January 2007 after the sale of stake in Sudipti, an examination is required as to whether Sudipti was dissociated for the purpose of avoiding any relevant disclosures that could arise if the entity continued to be part of the DLF group."

The SEBI order has also highlighted the complainant's allegation that DLF used Sudipti along with a maze of intermediary companies to purchase land which formed part of the land bank disclosed in the DRHP, but did not disclose anything about the transaction or about Sudipti.

Meanwhile, the counsel for the company has contended that the requirement under SEBI's disclosure guidelines was only to disclose litigation and according to him, the FIR cannot be treated as litigation.

The SEBI order has, however, noted that no guilt, if any, can be fastened on DLF, at this stage, on the basis of the said documents without obtaining the submissions of the company and Sudipti in that regard.

(Sourced from www.business-standard.com)