Rosen Law, a US-based law firm has filed a class-action lawsuit on behalf of its shareholders against HDFC bank claiming that the lender has misled its investors.
According to a copy of the complaint available on the firm's website, the law firm has sought a trial by jury and also damages from the bank.
The lawsuit names HDFC Bank, its outgoing managing director Aditya Puri, CEO-designate Sashidhar Jagdishan, and company secretary Santosh Haldankar as defendants.
Complaints state that HDFC made misleading statements.
The complaint, filed in the United States District Court for the Eastern District of New York, states that the defendants made false and misleading statements regarding the bank's business, operational, and compliance policies.
The lawsuit represents all people and entities, other than the defendant, who purchased or acquired securities of HDFC between July 31, 2019, and June 30, 2020, inclusive of both the dates, seeking to recover damages caused by the defendant and it's alleged violations of federal securities laws.
The complaint said, “Specifically, Defendants made false and/or misleading statements and/or failed to disclose that
(i) HDFC Bank had inadequate disclosure controls and procedures and internal control over financial reporting
(ii) as a result, the Bank maintained improper lending practices in its vehicle-financing operations
(iii) accordingly, earnings generated from the Bank’s vehicle-financing operations were unsustainable
(iv) all the foregoing once revealed, was foreseeably likely to have a material negative impact on the Bank’s financial condition and reputation
(v) as a result, the Bank’s public statements were materially false and misleading at all relevant times.”
HDFC's share price fell by $1.37 per share.
The lawsuit also quoted a report by The Economic Times saying that HDFC Bank’s American Depositary Share price fell by $1.37 per share, or 2.83%, to close at $47.02 per share on July 13, 2020. It further said that the plaintiff and other class members have suffered significant losses and damages as a result of the defendants’ wrongful acts and omissions.
The complaint said that the defendant knowingly or recklessly engaged in acts which operated as frauds and deceit against the plaintiff and other class members. This was done with the intention of deceiving the investors and artificially inflating/maintaining the bank's securities.
This scheme led to the plaintiff and other class members to purchase or acquire HDFC's securities at artificially inflated prices.
Shares of HDFC Bank ended at ₹1,083.25 on Thursday, 17th September 2020 on the BSE, 0.94% lower than their previous close.
Last month, after news first emerged, HDFC Bank had said that the action looked “frivolous as we believe we have been transparent in our disclosures”.