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TMI Blog2022 (5) TMI 1313X X X X Extracts X X X X X X X X Extracts X X X X ..... ween July 15, 2016 to March 1, 2017 could not be made the basis of UPSI. We, thus, conclude that since there was no UPSI during this period the trades executed by the appellants were not violative of Regulation 4(1). The EGM of IIL was held on March 1, 2017 on which date it authorized the Board of Directors to give a loan upto Rs. 600 crores or could acquire upto Rs. 600 crores. Thus, this information of acquisition, if any, came into existence on March 1, 2017. Thus, UPSI period can start from March 1, 2017 onwards till March 14, 2017. The appellants alleged that they were never in possession of UPSI. In this regard the resolution of IVL on July 15, 2016 to sell ILPL can be the starting point of UPSI. The WTM has however disregarded this date as not a UPSI. We also find that this information came in the public domain and therefore the decision to sell ILPL was not a price sensitive information nor was it an UPSI. WTM has strongly relied on the fact that the appellant Pia Johnson was a member of the managing committee appointed by the Board of Directors of IVL who were authorized to authorize IDSL to sale its stake in ILPL. Based on this fact, the WTM concluded that the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal has been filed against the order dated February 5, 2020 passed by the Whole Time Member ( WTM for short) of the Securities and Exchange Board of India ( SEBI for short) whereby the appellants have been restrained from accessing the securities market for a period of one year and has further been restrained from buying, selling or dealing in the securities of Indiabulls Ventures Ltd. ( IVL for short) for a period of three years and further the appellants have been directed to disgorge an amount of Rs. 87,21,918.55. Another appeal has also been filed against the order of the Adjudicating Officer ( AO for short) dated May 21, 2021 imposing a penalty of Rs. 25 lakh each on the appellants for the same violation. Since the issues involved are common, both the appeals are being decided together. 2. The facts leading to the filing of the present appeals are, that IVL is a listed Company and holds 100% shareholding in Indiabulls Distribution Services Ltd. ( IDSL for short). IDSL holds 100% shareholding in India Land and Properties Limited ( ILPL for short). Thus, ILPL is indirectly owned by IVL. 3. Indiabulls Real Estate Limited ( IREL for short) is a listed Company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this meeting it was agreed in principle that IIL will purchase the shareholding of ILPL instead of giving a loan. Between March 7, 2017 to March 14, 2017 discussions and finalization of the terms and conditions with regard to the sale of ILPL to IIL was already held which ultimately led to the execution of a definite agreement dated March 14, 2017 between IDSL, ILPL and IIL for sale of ILPL to IIL for Rs. 685 crores. This development was intimated to the Stock Exchange. 7. The appellant Pia Johnson was a non-executive director of IVL from March 10, 2015 to August 28, 2017. During this period the appellant purchased the shares of the Company IVL as under:- Period Trade date Buy Quantity Pre-UPSI Period (April 01, 2015 to January 23, 2017) 20/06/2016 135000 21/06/2016 170000 05/07/2016 0 Total 305000 During UPSI Period (January 24, 2017 to March 14, 2017) 16/02/2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and after giving an opportunity of hearing, final order dated February 5, 2020 was passed directing the appellants to disgorge an amount of Rs. 87,21,918.55 and further restrained the appellants from accessing the securities market for a specified period etc. The WTM came to the conclusion that the appellant Pia Johnson was an insider as per Regulation 2(1)(g) of the PIT Regulation, 2015 and that her husband Mehul Johnson was a connected person under Regulation 2(1)(d). The WTM further found that the two appellants had traded in the securities of the Company in violation of Regulation 4(1) of the PIT Regulations holding that the three ingredients in Regulation 4(1) were present in the trades executed by the appellants. The WTM found that there was a UPSI when the appellants had traded during February and March 2017 based on the fact that IVL had decided to sell ILPL held by IDSL for consideration more than the amount invested by IDSL, and that, on January 24, 2017, two CEOs of IVL and IRPL held discussions with regard to loan to ILPL by IIL. The WTM further came to a conclusion that the proposal to grant a loan which originated on January 24, 2017 eventually culminated into a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possession of unpublished price sensitive information, his trades would be presumed to have been motivated by the knowledge and awareness of such information in his possession;] Provided that the insider may prove his innocence by demonstrating the circumstances including the following : (i) the transaction is an off-market inter-se transfer between [insiders] who were in possession of the same unpublished price sensitive information without being in breach of regulation 3 and both parties had made a conscious and informed trade decision: [Provided that such unpublished price sensitive information was not obtained under sub-regulation (3) of the regulation 3 of these regulations:] [Provided further that such off-market trades shall be reported by the insiders to the company within two working days. Every company shall notify the particulars of such trades to the stock exchange on which the securities are listed within two trading days from receipt of the disclosure or from becoming aware of such information;] (ii) the transaction was carried out through the block deal window mechanism between persons who were in possession of the unpublished price sensiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be on the Board. (3) The Board may specify such standards and requirements, from time to time, as it may deem necessary for the purpose of these regulations. 15. The appellants have been charged with trading while in possession of UPSI. Regulation 4(1) of the PIT Regulation deals with trading while in possession of UPSI for insider trading. This Regulation 4(1) has three ingredients which is essential to attract the prohibition contained in Regulation 4(1), namely, (a) insider, (b) possession of UPSI by the insider and (c) trading in the securities by the insider. In the instant case, the appellants admit that they are insider and have also admit that they have traded during the alleged UPSI period. However, the appellants disputes the UPSI period and being in possession of UPSI. 16. The WTM in the impugned order finds that the information regarding investment by IIL in ILPL was a UPSI pertaining to the sale of shares of ILPL which came into existence on January 24, 2017 and became generally available on March 15, 2017. In our opinion this finding that the sale of the shares of ILPL started on January 24, 2017 is wholly illegal and is against the material evidence on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IL. (g) We are of the opinion that a loan is distinct from a sale and the two cannot be intermingled for the purpose of giving a finding that a loan culminated into a sale. 17. There is no doubt that information of sale of ILPL was in the public domain since July 15, 2016 but this information which came into the public domain was not treated to be an UPSI by the WTM on the ground that the resolution passed by IVL on July 15, 2017 was only a raw information and there was no crystallized offer through an identified purchaser or ascertained consideration amount for the purpose of crystallizing the UPSI. If the information of sale of ILPL by IVL on July 15, 2016 was not a UPSI and was in the public domain then the purchase of shares by the appellants between July 15, 2016 to March 1, 2017 could not be made the basis of UPSI. We, thus, conclude that since there was no UPSI during this period the trades executed by the appellants were not violative of Regulation 4(1). 18. The EGM of IIL was held on March 1, 2017 on which date it authorized the Board of Directors to give a loan upto Rs. 600 crores or could acquire upto Rs. 600 crores. Thus, this information of acquisition, if ..... X X X X Extracts X X X X X X X X Extracts X X X X
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