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HDFC Bank says aware of complaint filed against it in US

Rosen Legal has filed the suit against HDFC Bank Ltd, outgoing managing director Aditya Puri, chief executive officer-designate Sashidhar Jagdishan and company secretary Santosh Haldankar (Mint)Premium
Rosen Legal has filed the suit against HDFC Bank Ltd, outgoing managing director Aditya Puri, chief executive officer-designate Sashidhar Jagdishan and company secretary Santosh Haldankar (Mint)

  • HDFC Bank expects its response to the lawsuit to be due in early 2021
  • 'The lawsuit is based on allegations that the security holder claims caused a temporary decline in the Bank’s ADR stock price in July 2020,' says the lender

HDFC Bank on Monday issued a clarification on lawsuits from US-based law firms. The private lender said in a stock exchange filing that it denies allegations and will defend itself vigorously.

HDFC Bank expects its response to the lawsuit to be due in early 2021.

"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 stock price in July 2020. The Bank denies the allegations and intends to defend itself vigorously in the lawsuit. The Bank expects its response to the lawsuit to be due in early 2021," the lender said in its regulatory filing.

A law firm in the US has filed the class action suit against HDFC Bank, claiming damages for the losses incurred by investors because of "materially false and misleading" representations made by India's largest private sector lender.

A person aware of the development said that Monday’s disclosure is related to a lawsuit filed by Pomerantz LLP and the petition by Rosen Law Firm is yet to be filed.

Mint reported on 17 September that Rosen Law Firm’s complaint against HDFC Bank pertains to losses suffered by some investors because of alleged false and misleading statements by the lender. The case concerns reports that HDFC Bank car loan customers were forced to buy vehicle tracking devices from 2015 to 2019.

Meanwhile, Pomerantz has filed the suit against HDFC Bank, outgoing managing director Aditya Puri, chief executive officer-designate Sashidhar Jagdishan and company secretary Santosh Haldankar. It has put up the complaint on its website.

The lawsuit, filed in the court for the eastern district of New York, alleges that the defendants engaged in a plan, “scheme, conspiracy and course of conduct, pursuant to which they knowingly or recklessly engaged in acts...which operated as a fraud and deceit upon the plaintiff and other members of the class".

On 13 July, Bloomberg first reported that HDFC Bank was looking into alleged improper lending practices in its vehicle financing arm involving the then business head Ashok Khanna. The allegation was that the bank had forced its car loan customers to purchase a vehicle tracking device.

Following the news, HDFC Bank’s American depository share (ADS) price fell $1.37 per share, or 2.83%, to close at $47.02 per share on 13 July.

The lawsuit alleged that the bank failed to disclose it had inadequate disclosure controls and, as a result, maintained improper lending practices in its vehicle-financing operations.

“Since the lawsuit is at a premature stage, there is no matter at this point of time which requires disclosure as per Regulation 30 of Sebi (Listing Obligations & Disclosure Requirements) Regulations, 2015," the bank said on Monday.

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.

HDFC Bank shares closed 0.82 per cent down at 1,048.70 apiece on the BSE, as against 2.09 per cent correction on benchmark index Sensex.

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