Capital markets regulator Securities and Exchange Board of India (SEBI) on Monday slapped fines totaling Rs 20 lakh on two former promoters of Dewan Housing Finance Corp Ltd (DHFL) for flouting disclosure norms.

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Individually, the regulator levied a penalty of Rs 10 lakh each on Kapil Wadhawan and Dheeraj Wadhawan, who were promoters of DHFL (now known as Piramal Finance).

The order came after SEBI conducted an investigation into the transfer of shares held by DHFL in DHFL Pramerica Life Insurance (erstwhile DLF Pramerica Life Insurance) to its wholly-owned subsidiary DHFL Investments and other related transactions.

The investigation period was from February-March 2017.

In its 45-page order, SEBI’s Adjudicating Officer Prasanta Mahapatra said, "I find that complete and adequate information was not disclosed to the shareholders of the company as observed from the postal ballot notice and draft share purchase agreement (SPA), which was the responsibility of the noticee (Kapil Wadhawan and Dheeraj Wadhawan)".

The postal ballot notice was deficient regarding the terms of the option agreement, such as cost or fee charged for the options, how compulsorily convertible debentures (CCDs) would be transferred to DHFL, impact on shareholders of DHFL if options were to be exercised by Wadhawan Global Capital (WGC), the order said.

The series of events were designed in such a way so as to give benefits to the promoters of the company (WGC), which may cause future losses for the minority shareholders of DHFL, Mahapatra said.

The incomplete disclosure defeats the entire purpose of having the resolution approved by the shareholders and it is against the principles of good corporate governance, he added.

Kapil Wadhawan was the Chairman and MD of DHFL, while Dheeraj Wadhawan is the brother of Kapil and was a non-executive director in the company. Both of them were on the board of DHFL.

The draft postal ballot notice was duly initiated by Kapil as the chairman. The draft postal ballot notice contained the draft resolution for entering into a related party transaction with WGC, a promoter entity, and a wholly-owned subsidiary of DHFL Investments Ltd (DIL).

Dheeraj was also present at the meeting of the board, where the draft postal ballot notice was approved.

Considering the position held by Wadhawans as promoters and directors in DHFL, both are responsible for inadequate information provided in the postal ballot notice by the firm.

SEBI found that the noticees have violated market norms by not disclosing the information regarding CCDs and put options in the postal ballot notice at the time of taking approval from the shareholders of the company for the subject-related party transaction.