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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 ..... es 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 it has a subsidiary Company known as Indiabulls Infrastructure Limited ('IIL' for short). 4. On November 19, 2014 IDSL acquired ILPL for Rs. 600 crores and this fact was disseminated on the Stock Exchange platform. On May 4, 2016 the Board of Directors of IDSL resolved to sell the entire investment in ILPL for not less than the acquisition cost. Based on the aforesaid resolution, the Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 275000 17/02/2017 80000 22/02/2017 150000 Total 505000 - 0 8. Pia Johnson's husband Mehul Johnson also purchased shares of IVL as under:- Period Trade date Buy Quantity Pre-UPSI Period (April 01, 2015 to January 23, 2017) 20/06/2016 45000 Total 45000 During UPSI Period (January 24, 2017 to March 14, 2017) 14/02/2017 166000 16/02/2017 122970 09/03/2017 50000 Total 338970 - 0 9. SEBI conducted an investigation into suspected insider trading activities of certain entities in the scrip of IVL for the period January 1, 2017 to November 3, 2017 to ascertain whether or not suspected entities had traded in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was made public on March 15, 2017 and thus the UPSI regarding sale of ILPL came into existence on January 24, 2017. The WTM further came to a conclusion that the UPSI period was between January 24, 2017 to March 14, 2017 which information was not published. 11. The WTM further came to a conclusion that the information regarding sale of ILPL by IDSL for more than Rs. 600 crores was already in the public domain since July 15, 2016 was irrelevant as it was only an information and was not crystallized in concrete UPSI since there was no identified purchaser nor the number of shares to be sold was ascertained nor the consideration amount was finalized nor the agreed time between the buyer and seller was finalized. The resolution of the EGM dated July 15, 2016 was a general resolution which was not crystallized and was not acted upon and thus can be said to have lapsed. The WTM went on to hold that only in principle approval was accorded by IVL in the EGM resolution on July 15 2016 which entered into an execution stage on January 24, 2017. 12. We have heard Shri Somasekhar Sundaresan, the learned counsel for the appellant and Shri Shyam Mehta, the learned senior counsel for the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... informed trade decision: Provided that such unpublished price sensitive information was not obtained by either person under sub-regulation (3) of regulation 3 of these regulations. (iii) the transaction in question was carried out pursuant to a statutory or regulatory obligation to carry out a bona fide transaction. (iv) the transaction in question was undertaken pursuant to the exercise of stock options in respect of which the exercise price was predetermined in compliance with applicable regulations.] (v) in the case of non-individual insiders :- (a) the individuals who were in possession of such unpublished price sensitive information were different from the individuals taking trading decisions and such decision-making individuals were not in possession of such unpublished price sensitive information when they took the decision of trade; and (b) appropriate and adequate arrangements were in place to ensure that these regulations are not violated and no unpublished price sensitive information was communicated by the individuals possessing the information to the individuals taking trading decisions and there is no evidence of such arrangements having been breached; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PL between the Chief Executive Officer of IVL Mr. Divyesh Shah and Mr. Gurbans Singh, CEO of IREL nor there is anything on record to suggest that any offer for purchase of ILP was made. The record indicates that the discussion was with regard to a loan requested by ILPL from IIL; (b) Pursuant to the discussion on January 24, 2017 a notice by IIL was issued for convening a meeting of the Board of Directors of IIL for the purpose of investing surplus funds of Company by way of loan. The Board of Directors on February 3, 2017 resolved to convene EGM on March 1, 2017 for investing surplus funds by way of loan. Thus, till Febuary 3, 2017 there was no indication from IIL that they were interested in purchasing ILPL. (c) The shareholders of IIL in its EGM held on March 1, 2017 resolved to invest surplus funds upto Rs. 600 crores by way of loan and further authorized the Board of Directors in terms of Section 186 of the Companies Act, 2013 to invest upto Rs. 600 crores by way of purchase of a Company. Thus, at best it can be said that the intention to purchase an entity by investing its surplus funds came into existence on behalf of IIL for the first time on March 1, 2017. (d) The me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. 20. The 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 appellant Pia Johnson had inside information and was in possession of UPSI. This fact that the appellant was a member of the managing committee can create a suspicion that the appellant could be in possession of UPSI but in our opinion the appellants were successful in proving that they had no UPSI. It has come on record that no meeting of this managing committee was ever held and therefore there was no occasion to discuss the sale of ILPL. Further, we find that there is no finding that the resolution of IIL on March 1, 2017 or notice dated January 25, 2017 or resolution of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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