India’s largest private sector lender HDFC Bank on Monday denied the allegations of misleading claims levelled by a US-based law firm to seek damages in a class action suit.
The bank vowed to defend itself “vigorously” in the lawsuit and added that the response to the lawsuit will be ready by early next year.
Rosen Legal last week filed the class action suit seeking damages for the losses incurred by investors because of alleged “materially false and misleading” representations by HDFC Bank. It had specifically named the bank’s chief executive and managing director of over 25 years, Aditya Puri, his designated successor Sashidhar Jagdishan and company secretary Santosh Haldankar as defendants.
The bank said the lawsuit has been filed against three of its employees by a “single small security holder who seeks to represent a class” of its security holders, and is based on allegations, that the security holder claims, caused a temporary decline in the Bank’s ADR (American Depository Receipt) stock price in July.
“The Bank denies the allegations and intends to defend itself vigorously in the lawsuit,” it said in an exchange filing.
The complaint did not mention the exact quantum of the damages sought though it maintained that may be thousands of investors would have suffered.
As per the suit, bank officials “engaged in a plan, scheme, conspiracy and course of conduct, pursuant to which they knowingly or recklessly engaged in acts, transactions, practices and courses of business which operated as a fraud and deceit”, resulting in the losses to investors.
The allegations pertain to the vehicle finance vertical, where the Bank has later acknowledged to have found some improprieties which resulted in some executives being acted against.
The bank had inadequate disclosure controls and procedures and internal control over financial reporting, maintained improper lending practices in the vehicle financing making the operations unsustainable and all this was likely to have a materially negative impact on its financial condition and reputation, it alleged.
“The Bank’s public statements were materially false and misleading at all relevant times,” the suit claims, adding the defendants “knew that the adverse facts” had not been disclosed and were being “concealed from the public”.
The period during which the losses are alleged to have happened to the investors is between July 31, 2019 and July 10, 2020 which is referred to as the “class period”.
Initially, the bank had termed the move to file the suit as “frivolous” and asserted that it has been transparent in all its disclosures.
According to reports, the bank used to bundle vehicle tracking devices along with auto loans sold by it, resulting in an additional cost to the borrower, and also concerns over privacy.
There was speculation over the circumstances under which its head of the unit left the office, but the bank later clarified that it was a scheduled retirement.
