Class-action suits have been slapped on HDFC Bank by two law firms in the United States of America. Rosen Law Firm and Schall Law Firm have filed suits against the bank for making false and misleading statements and seeks to recover damages.
The development comes after the Rosen law firm last month announced an investigation of potential securities claims on behalf of shareholders of HDFC Bank following allegations that the bank may have issued materially misleading business information to investors.
According to the lawsuit, HDFC Bank made false and misleading statements between July 31, 2019 and July 10, 2020 and didn’t disclose to investors that it did not have enough disclosure controls and procedures in place and also didn’t have adequate internal control over financial reporting. As a result of this, the lawsuit alleges that the bank maintained improper lending practices in its vehicle financing operations.
Further, earnings generated from the bank's vehicle financing operations were "unsustainable", as per the lawsuit and it added that all the foregoing, once revealed, was foreseeably likely to have a material negative impact on the bank's financial condition and reputation.
The law firm said that the bank's public statements "were materially false and misleading at all relevant times".
The lawsuit filed by the Schall Law Firm says that HDFC Bank violated sections of the Securities Exchanges Act and a rule of the US Securities and Exchange Commission.
HDFC reportedly made false and misleading statements to the market and “failed to maintain appropriate disclosure controls and internal controls on financial reporting”. It also added that the company engaged in improper lending practices in the vehicle finance business.
Both lawsuits allege that when the market learned the truth about HDFC Bank, investors suffered damages.
The lawsuits name managing director Aditya Puri, CEO-designate Sashidhar Jagdishan, and company secretary Santosh Haldankar Individually and ‘on behalf of all others’.
In July, managing director Aditya Puri said during the company’s Annual General Meeting that they received whistle-blowing complaints, and internal enquiries were carried out into the vehicle lending portfolio.
“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 reportedly said, and added that it brought out aspects of personal misconduct by employees. Disciplinary action was initiated against them, he added.
Mint reported in July that the bank’s car loan customers were allegedly forced to buy a vehicle tracking device for four years (2015-2019). The report said that executives of the bank pushed loan customers to buy GPS devices priced between Rs 18,000 and Rs 19,500.
Following reports of the class action suits, HDFC Bank’s stock closed half a percent lower at $50.23 on the Nasdaq and was trading nearly 1% lower on the Sensex and Nifty in India.
With inputs from agencies
