US-based Rosen Law Firm files lawsuit against HDFC Bank

US-based Rosen Law Firm has filed a class action suit against HDFC Bank on behalf of its shareholders, alleging 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 Rosen’s website.

Last month, after news of Rosen Law Firm planning a class action suit first emerged, HDFC Bank had said prima facie, the action looked “frivolous as we believe we have been transparent in our disclosures”.

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. An email seeking a response from HDFC Bank remained unanswered till the time of going to press.

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.”

The lawsuit quoted a report by The Economic Times about HDFC Bank’s probe into lending practices at its vehicle-loan division and said that on this news, HDFC Bank’s American Depositary Share (ADS) price fell $1.37 per share, or 2.83%, to close at $47.02 per share on July 13, 2020. It said that the plaintiff and other class members have suffered significant losses and damages as a result of the defendants’ wrongful acts and omissions, and “the precipitous decline in the market value of the Bank’s securities” the complaint said.

The complaint accused the defendants of having 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 upon the plaintiff and the other members of the class. This was intended to deceive the investing public, artificially inflate and maintain the market price of HDFC Bank securities, the complaint said. The suit also stated that the scheme caused the plaintiff and other members of the class to purchase or otherwise acquire HDFC Bank securities and options at artificially inflated prices.

Shares of HDFC Bank ended at Rs 1,083.25 on Thursday on the BSE, 0.94% lower than their previous close.