The pace at which justice is delivered in our country is not only affecting investors’ wealth, it is beginning to erode their confidence in the financial system too.

Those investing in DLF stock got a rude shock when the company’s top executives were barred from transacting or raising funds from stock exchanges for a period of three years. The stock dropped over 30 per cent when the verdict was announced in October 2014.

But the complaint based on which this penalty was meted out was filed seven years ago. The issue was that material information regarding a pending litigation was not disclosed in the offer document. It has also come to light that besides the widely-reported complaint, the regulator had received several other complaints against DLF . SEBI’s lawyer has revealed that about 336 companies ceased to be associates of DLF just before the IPO in 2007.

The delay in these disclosures goes against the interest of investors who have bought the shares over the past seven years. Home buyers who entered into contracts to purchase homes in DLF’s Beliare project in Gurgaon face a similar predicament. In 2010, the buyers faced huge delays in getting possession and the original plan for a 19-storey building was changed to 29 floors.

In August 2011, the Competition Commission of India found DLF guilty of misusing its dominant position in the market. It directed that clauses in the home purchase agreement be made ‘fair’ and slapped a fine of ₹630 crore on the company. This order went for appeal and was upheld by the Competition Appellate Tribunal. The case is still pending, now with the Supreme Court.

It is sad that investors placed confidence in DLF even as alleged violations existed. Had the investors been armed with a final judgement, they might have acted differently.

Chief Research Analyst

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