Money & Banking

Two US-based law firms file class-action suits against HDFC Bank

Our Bureau Mumbai | Updated on September 17, 2020 Published on September 17, 2020

The lawsuit seeks to recover damages for HDFC investors under the federal securities laws

Two US based law firms -- Rosen Law Firm and Schall Law Firm have filed class-action suits against HDFC Bank and have sought damages on behalf of investors for false and misleading statements.

The lawsuit, filed in the US District Court, Eastern District of New York, names HDFC Bank, its current Managing Director and CEO Aditya Puri, CEO-designate Sashidhar Jagdishan, and company secretary Santosh Haldankar as the defendants.

“Rosen Law Firm, a global investor rights law firm, announces the filing of a class-action lawsuit on behalf of purchasers of the securities of HDFC Bank between July 31, 2019 and July 10, 2020, inclusive. The lawsuit seeks to recover damages for HDFC investors under the federal securities laws,” it said in a statement.

According to the lawsuit, the defendants made false and misleading statements and failed to disclose to investors that it had inadequate disclosure controls and procedures and internal control over financial reporting.

 

“...as a result, the bank maintained improper lending practices in its vehicle-financing operations; accordingly, earnings generated from the bank's vehicle-financing operations were unsustainable; all the foregoing, once revealed, was foreseeably likely to have a material negative impact on the Bank's financial condition and reputation; and as a result, the bank's public statements were materially false and misleading at all relevant times,” Rosen Law Firm said, adding that when the true details entered the market, the lawsuit claims that investors suffered damages.

Rosen Law Firm had last year also initiated a class action suit against Infosys.

Similarly, Schall Law Firm also announced the filing of a class-action lawsuit against HDFC Bank and has “encouraged” investors with losses over $100,000 to contact it.

BusinessLine has contacted HDFC Bank for a response on the issue.

The country’s largest private sector lender will see a change in its top management over the next few months. Puri retires on October 26 and will be succeeded by Sashidhar Jagdishan as the next Managing Director and CEO of HDFC Bank.

The two firms had last month announced that they were launching an investigation into claims against HDFC Bank, which could potentially result in class action lawsuits.

Allegations of improper lending practices

In July, it had come to light that HDFC Bank had probed allegations of improper lending practices and conflicts of interests in its vehicle-financing operations involving the unit's former head. This had come after Ashok Khanna who was Group Head – automobile loans had retired earlier this year

In a statement at the time, HDFC Bank had said the executive concerned was on an extension of service and retired on March 31, 2020 in the normal course of employment.

“The bank has a well-established process of investigating every complaint it receives and takes action as appropriate. In the said instance as well, the bank has followed the due process,” it had further said.

According to reports, the investigation had revealed that customers of the bank’s car loans were being given GPS devices without their knowledge.

The lender’s Managing Director and CEO Aditya Puri at the annual general meeting on July 18 had confirmed that the bank conducted an inquiry into vehicle loans and appropriate action has been taken against employees involved in the misconduct.

He had also commented on recent high-level exits and had said that Munish Mittal, Chief Information Officer, Abhay Aima, Group Head, Private Banking and Ashok Khanna, Group Head, automobile loans have left. Puri said Aima’s exit was amicable and Mittal has gone to study abroad at Oxford.

News agency Bloomberg had also reported that credit information bureau Experian’s Indian unit had informed the RBI that HDFC Bank had been late in providing details of its loans, including the repayment status of its millions of retail borrowers. The report had said that such delays had been an issue for about two years, although HDFC Bank had denied this.

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Published on September 17, 2020
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