2012 (6) TMI 868 - AT - Companies Law

Summary

Issues Involved:
1. Alleged violation of Regulation 3 of the SEBI (Prohibition of Insider Trading) Regulations, 1992.
2. Determination of whether the information regarding bagging of projects worth Rs. 172 crores was "price sensitive information."
3. Examination of procedural discrepancies in the adjudicating officer's order.

Summary:

1. Alleged Violation of Regulation 3 of SEBI (Prohibition of Insider Trading) Regulations, 1992:
The appellants were accused of trading in the shares of M/s. Valecha Engineering Ltd. while in possession of unpublished price sensitive information. The adjudicating officer of SEBI found them guilty and imposed penalties of Rs. 20 lacs and Rs. 3.40 lacs respectively. The appellants denied the allegations and filed appeals against the orders.

2. Determination of Price Sensitive Information:
The core issue was whether the information about bagging projects worth Rs. 172 crores was "price sensitive information" u/s Regulation 2(ha) of the insider trading regulations. The Tribunal noted that the company regularly informed stock exchanges about orders exceeding Rs. 100 crores as part of its business practice. The adjudicating officer failed to consider that the information was not unusual for the company, which had orders worth Rs. 1000 crores pending execution. The Tribunal emphasized that the award of contracts through a transparent tendering process was known to participants and not necessarily price sensitive.

3. Procedural Discrepancies:
The Tribunal highlighted several discrepancies in the adjudicating officer's order:
- The officer incorrectly assumed the information was price sensitive without proper examination.
- The adjudicating officer erroneously stated that the company bagged orders worth Rs. 172 crores from the Government of Arunachal Pradesh, whereas it was only Rs. 79 crores.
- The officer considered transactions on August 28, 2009, which were not part of the show-cause notice and occurred after the information was made public.

Conclusion:
The Tribunal set aside the impugned order, concluding that the information regarding the contracts was not price sensitive. Consequently, the charges against both appellants failed, and the appeals were allowed with no order as to costs.