“Throughout the class period, defendants made materially false and misleading statements regarding the bank’s business, operational and compliance policies,” the complaint filed in the court which ET has seen claims.
The law firm has alleged that senior personnel made false and misleading statements and failed to disclose that HDFC Bank had inadequate disclosure controls, as a result of which it allegedly maintained improper lending practices in its vehicle financing operations. It has further claimed that earnings generated from the bank’s vehicle financing operations were unsustainable.
Specially targeting Puri, Jagdishan and Haldankar, the law firm claimed that due to the positions they held with bank and their access to material information available to them, “the defendants knew that adverse facts had not been disclosed and were being concealed from the public.”
“The defendants are liable both directly and indirectly for the wrongs, because of their positions of control and authority, the defendants were able to, directly or indirectly, control the content of statements of HDFC Bank,” the complaint states.
HDFC Bank said it was studying the lawsuit.
“We were unaware of any such development (class action lawsuit) till we heard about it from the media a little earlier today, we are getting details of it,” the bank said. “We’ll examine it and respond to it as appropriate. Prima facie it does look frivolous as we believe we have been transparent in our disclosures.”
The law firm in its complaint has relied on media reports about a probe conducted in the vehicle financing unit by the bank. An ET report on July 13 stated that the lender had found conflict of interests in its vehicle financing operations. After this report, HDFC Bank’s American Depositary Receipt price fell $1.37, or 2.83%, the law firm said.
ET in its June 20 edition reported that HDFC Bank terminated at least six senior and mid-level executives after an internal probe revealed that they indulged in practices that were seen to be corrupt and violated the code of conduct and governance standards of the bank. This pertained to the auto loans department where some staff pushed GPS devices in lieu for auto loans. Some errant employees had started forcefully bundling these products with car loans to meet sales targets and potentially track borrowers in the event of a default.
Speaking at the bank’s annual general meeting in July, Puri had denied any “conflict of interest” in the operations.
“We had received some whistle-blowing complaints; internal enquiries carried out in the matter on the complaints received has not brought out any conflict of interest issue nor does it have any bearing on our loan portfolio,” Puri had said. “Enquiry did bring out another aspect related to personal misconduct exhibited by a set of individuals for which appropriate disciplinary actions have been taken.”
Rosen Law has filed similar class action complaint against IT major Infosys which was quashed by the US court in July this year.