Recent Developments in Criminal Liability concerning misrepresentation in a prospectus

The parliament in India has recently passed an amendment to the companies act, which amends the fine, nature, and punishment for 48 offenses (not involving frauds). The companies' act after the recent amendments will have 124 penal provisions compared to the original 134 which were present in the companies act. One of the most recent cases which have been dealing with misrepresentation in a prospectus is that of DLF it was a red herring prospectus dealing with the IPO of DLF. A penalty of 26 crores was imposed upon the directors of the company. After a SEBI probe indicated that the company DLF had camouflaged its association with 3 particular subsidiaries -Felicite Builders and Construction Pvt. Ltd, Shalika Estate Developers Pvt. Ltd and Sudipti Estates Pvt. Ltd. The red herring prospectus of DLF was issued in 2006 and contained information about the above 3 subsidiaries. The entire shareholding of the 3 companies was held by some of DLFS's wholly-owned subsidiaries. The second draft red herring prospectus filed in 2007 did not mention the 3 subsidiaries. Facts of The DLF Case- deals with the SEBI order. This order was overturned by SAT, however, in 2019 the SC has issued notices to DLF DLF came out with an IPO in 2007 for issuing 17,50,00,000 equity shares at 2 at the price of rupees 525 aggregating to 9187.5 crores. In furtherance of the IPO process, DLF filed a Draft red herring prospectus with SEBI on 2nd January 2007. Before this, a previous draft red herring prospectus was filed in 2006 by DLF. After which the final red herring prospectus was filed on May 25th, 2005 by DLF. The issue of shares was for 4 days namely 11th June 2007 to 14th June 2007. The shares of DLF were now listed and traded on BSE and NSE. A complaint was filed by Mr. Kimsuk Sinha, 2 complaints were filed by him with SEBI on 4th June 2007 and 19th July 2007. Who claimed that Sudipit estates Pvt ltd and other persons involved had cheated him of 34 crores concerning a land transaction. Further, that Sudipiti was owned by DLF Home developers Ltd (DHDL) and DLF Estate developers ltd (DEDL). Both of these companies are wholly owned subsidiaries of DLF holding 5000 equity shares each. The complainant wanted SEBI to not allow DLF with going ahead with the IPO in the public interest. DLF however claimed that it was in no way related to Sudipti and denied that Sudipiti is its subsidiary.

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.