HDFC Bank faces lawsuit in US

US-based Rosen Law Firm has filed a class action lawsuit against HDFC Bank for 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.

The law firm has filed the suit against HDFC Bank Ltd, outgoing managing director Aditya Puri, chief executive officer-designate Sashidhar Jagdishan and company secretary Santosh Haldankar. Rosen Law Firm 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”.

Rosen Law Firm represents investors across the world, concentrating its practice in securities class actions and shareholder derivative litigation.

Last month, the firm announced an investigation of potential securities claims on behalf of shareholders of the bank.

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.

Therefore, the lawsuit said, the bank’s earnings generated from the vehicle-financing operations were unsustainable and the alleged inadequacies, once revealed, were likely to have a material negative impact on the bank’s financial condition and reputation.

“As a result, the bank’s public statements were materially false and misleading at all relevant times.”

The lawsuit alleged that by virtue of their positions at HDFC Bank, the defendants had knowledge of “materially false and misleading statements and material omissions” and intended thereby to “deceive plaintiff and the other members of the class...”

“Or in the alternative, the defendants acted with reckless disregard for the truth in that they failed or refused to ascertain and disclose such facts as would reveal the materially false and misleading nature of the statements made, although such facts were readily available to defendants,” the complaint said.

An email sent to HDFC Bank remained unanswered.

On 20 July, Mint reported that HDFC Bank executives pushed auto loan customers to buy GPS devices costing ₹18,000- ₹19,500 from 2015 to December 2019 in a possible breach of guidelines prohibiting banks from non-financial businesses.