2006 (10) TMI 500 - AT - SEBI

Summary

Issues Involved:
1. Allegation of insider trading u/s 15T of the SEBI Act, 1992.
2. Determination of whether the appellant was an insider.
3. Examination of the appellant's involvement in trading activities.
4. Evaluation of the appellant's defense and evidence presented.

Summary:

1. Allegation of Insider Trading u/s 15T of the SEBI Act, 1992:
The appeal was filed against the order dated August 8, 2005, by the adjudicating officer imposing a penalty of Rs. 5 lacs on the appellant and Anjudi Property and Investment P. Ltd. for trading in the shares of Tata Finance Ltd. (TFL) in March 2001, allegedly based on unpublished price-sensitive information received from Shri Dilip Pendse, the managing director of TFL.

2. Determination of Whether the Appellant was an Insider:
The appellant was alleged to have sold 2.5 lac shares of TFL on March 28, 2001, before the public disclosure of a Rs. 79.37 crore loss by Nishkalp Investment and Trading Company Ltd. (NITC), a wholly-owned subsidiary of TFL. The information was made public on April 30, 2001, causing the share price to fall from Rs. 90 to Rs. 30. The appellant was deemed an insider as per Regulation 2(e) and 3 of the SEBI (Prohibition of Insider Trading) Regulations, 1992, due to her close relationship with Shri Pendse, who had access to the unpublished price-sensitive information.

3. Examination of the Appellant's Involvement in Trading Activities:
The appellant denied trading in the shares, claiming that Shri Pendse managed the accounts and transactions on her behalf. However, her statements to the Board revealed that she actively placed orders, managed operations, and was knowledgeable about the market. The evidence showed that she signed cheques, delivery instruction forms, and was involved in the decision-making process for share transactions.

4. Evaluation of the Appellant's Defense and Evidence Presented:
The appellant's defense was that she was a name lender and had no knowledge of the operations, which was contradicted by her own statements and evidence. The Tribunal found that she was in control of the company's operations and had benefited from the insider trading. The appeal was dismissed, and the penalty was upheld, with no order as to costs.

Conclusion:
The Tribunal concluded that the appellant was an insider who traded based on unpublished price-sensitive information, resulting in unjust profits. The appeal was dismissed, affirming the penalty imposed by the adjudicating officer.