HDFC Bank denies allegations made in US lawsuits against it

HDFC Bank on Monday issued a statement in response to the lawsuits filed against it by multiple law firms in the US, denying the allegations made therein. The bank said that the litigant was a single security holder, who was purporting to represent a class of its shareholders.

In a notification to the exchanges, HDFC Bank said, “…we wish to inform you that the bank is aware of a complaint that was recently filed against the bank and its three employees in the United States. The lawsuit, which was filed by a single small security holder who seeks to represent a class of the bank’s security holders, 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 2020.”

Denying the allegations, the lender said it intends to defend itself vigorously in the lawsuit. It expects its response to the lawsuit to be due in early 2021.

The class action suit filed by Pomerantz alleged that the lender had misled its investors. The firm has sought damages from the bank and sought a trial by jury, according to a copy of the complaint available on Pomerantz’s website. The lawsuit names HDFC Bank, its outgoing managing director Aditya Puri, CEO-designate Sashidhar Jagdishan and company secretary Santosh Haldankar as defendants.

Filed in the United States District Court for the Eastern District of New York, the complaint states that the defendants made materially false and misleading statements regarding the bank’s business, operational and compliance policies. The lawsuit represents a class consisting of all persons and entities other than the defendants who purchased or otherwise acquired HDFC Bank securities between July 31, 2019 and July 10, 2020, both dates inclusive, seeking to recover damages caused by the defendants’ alleged violations of federal securities laws and to pursue remedies.

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; and (v) as a result, the Bank’s public statements were materially false and misleading at all relevant times.”

On Monday, shares of HDFC Bank ended at Rs 1,048.70 on the BSE, 0.82% lower than their previous close.