9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (3) TMI 806 - AT - SEBIInsider trading - appellants entered into suspected insider trading being privy to unpublished price sensitive information ( UPSI ) of declining profits of TJL and disposed of their promoter shareholding and thereby avoided losses - violation of Code of Conduct applicable to insiders by not taking pre-clearances from the concerned authority of the company for trading in the shares of the company during the UPSI period - contention of the appellants that the impugned order has been passed in haste and that too without show-causing the appellants and thereby not providing them an opportunity of presenting the full facts - HELD THAT - Having heard the learned counsel for the parties at reasonable length, we proceed to dispose of the appeal at the stage of admission itself without calling for reply/rejoinder etc. as this matter is squarely covered by our orders in Abhijit Rajan's case 2019 (11) TMI 1598 - SECURITIES APPELLATE TRIBUNAL MUMBAI and Dr. Udayant Malhoutra's case 2020 (6) TMI 742 - SECURITIES APPELLATE TRIBUNAL MUMBAI wherein held even if it is assumed that the information was is a price sensitive information, still the appellant cannot be blamed of insider trading for the reasons that he did not trade on the basis of the information . The appellant was able to show his dire need to infuse fund in the entity under the master restructuring agreement to implement a CDR package as detailed supra. He was even required to sell his agricultural land and flat details of which are already given hereinabove.appellants therein were able to rebut the presumption that they traded on the basis of UPSI as they had a necessity to sell the shares. In the present appeal before us, however, since all the facts are yet to be analysed by the respondent SEBI upon hearing the appellant, we do not propose to make any comment on the merit of the case at this stage. Accordingly, we quash and set aside the impugned Order, except as a Show Cause Notice (SCN), upon deposit of the amounts as specified below. Appellants are directed to file a reply to the SCN within four weeks from today. The respondent will decide the matter finally after giving an opportunity of hearing to the appellant either through physical hearing or through video conference within six months thereafter. In the interim, in order to safeguard the interests of the investors in the securities market and also to protect the integrity of the securities market, we further direct the appellants to deposit the specified amounts.
Issues Involved:
1. Ex-parte order by SEBI. 2. Alleged insider trading and violation of the Code of Conduct. 3. Appellants' defense and contention of no UPSI. 4. SEBI's justification for the impugned order. 5. Relevance of precedents from previous cases. 6. Tribunal's decision and directions. Detailed Analysis: 1. Ex-parte Order by SEBI: The appeal arises from an ex-parte order passed by the Whole Time Member (WTM) of SEBI on September 04, 2020. This order directed the impounding of alleged unlawful notional loss avoided by the appellants during the UPSI period. The appellants were also directed to credit the amounts to an interest-bearing Escrow Account and were restricted from disposing of their assets without SEBI's permission. 2. Alleged Insider Trading and Violation of the Code of Conduct: The appellants, who were promoters of Tara Jewels Limited (TJL), were accused of insider trading during the period from October 01, 2017, to December 31, 2017. It was alleged that they traded shares while in possession of unpublished price-sensitive information (UPSI) about the company's declining profits, thereby avoiding losses. Additionally, they were charged with violating the Code of Conduct by not obtaining pre-clearances for their trades. 3. Appellants' Defense and Contention of No UPSI: The appellants contended that the impugned order was passed hastily without a show-cause notice, depriving them of the opportunity to present their case. They argued that the declining profits of TJL were public information since 2016, and their share sales were intended to infuse funds into the company to revive its fortunes. They claimed full disclosure and cooperation with SEBI and emphasized that no UPSI existed. They cited the Tribunal's decision in Abhijit Rajan v. SEBI, where similar actions were justified due to the necessity to infuse funds. 4. SEBI's Justification for the Impugned Order: SEBI's counsel argued that the order was justified due to the appellants' attempt to become unsecured creditors by lending funds to the company, which had gone into liquidation. SEBI emphasized the necessity to secure the amount of loss averted by the appellants while trading as insiders. They highlighted the appellants' failure to pre-clear trades as a violation of the insider trading code of conduct. SEBI sought to protect investors' interests and the integrity of the securities market. 5. Relevance of Precedents from Previous Cases: The Tribunal referred to its previous orders in Abhijit Rajan's case and Dr. Udayant Malhoutra's case. In Abhijit Rajan's case, the Tribunal held that the appellant could not be blamed for insider trading if they did not trade "on the basis of the information" and had a necessity to sell shares. In Dr. Udayant Malhoutra's case, the Tribunal quashed a similar impounding direction, stating that no amount towards disgorgement could be directed to be deposited in advance unless adjudicated and quantified. The Tribunal emphasized that ex-parte interim orders should be passed sparingly and only in extreme urgent matters. 6. Tribunal's Decision and Directions: The Tribunal quashed and set aside the impugned order, except as a Show Cause Notice (SCN). The appellants were directed to file a reply to the SCN within four weeks. SEBI was instructed to decide the matter finally after giving the appellants a hearing within six months. The appellants were directed to deposit the specified amounts in an interest-bearing Escrow Account with SEBI within four weeks to safeguard investors' interests and protect the securities market's integrity. The Tribunal's order was digitally signed due to the Covid-19 pandemic, and parties were directed to act on the digitally signed copy. This comprehensive analysis covers all relevant issues and preserves the legal terminology and significant phrases from the original text.
|
