Markets regulator SEBI has disposed of adjudicating proceedings against Abhijit Rajan, former chairman of Gammon Infrastructure Projects, in an alleged insider trading case. It was alleged that Rajan violated the code of corporate disclosure practices under prevention of insider trading norms.
"I conclude the allegations levelled in the said SCN (show cause notice) against the noticee i.e Abhijit Rajan does not stand established," SEBI Adjudicating Officer Sangeeta Rathod said in an order passed on Tuesday.
The regulator undertook a probe in the scrip of Gammon Infrastructure Projects Ltd (GIPL) during July-September 2013 following an input from the NSE concerning the possibility of certain entities having traded in the company's shares on the basis of unpublished price sensitive information (UPSI).
The matter pertains to Gammon Infra's board decision to approve termination of tie up with Simplex Infrastructure. It was alleged that the termination decision should have been intimated to exchanges immediately, but it was done with a delay of 26 days.
Rajan, being director of GIPL during the relevant period attended the board meeting, and was alleged to have violated the code of corporate disclosure practices under insider trading norms.
He contended that GIPL's investment in the Simplex project in the financial year represented only 0.05 per cent of the GIPL's order book value at the end of August 2013, which cannot be construed as price sensitive.
"It cannot be concluded that the said information is UPSI and that the disclosure of the same to the exchange on a particular date was relevant at that juncture. With regards to the code of conduct followed by the GIPL, I do not observe any deviation of MCC (model code of conduct) from the insider trading code of the GIPL as available on record," Rathod said.
Accordingly, the Securities and Exchange Board of India (SEBI) disposed of the adjudication proceedings initiated against Rajan.
Earlier, the Securities Appellate Tribunal (SAT) in November 2014 had set aside a SEBI order that banned Rajan from the capital markets for alleged insider trading.
In July 2014, the regulator had barred Rajan after finding him guilty of trading in shares on the basis of unpublished price sensitive information. It had also directed him to disgorge an amount of Rs 1.09 crore, which was already deposited by him in an escrow account. This direction was further confirmed by the regulator through a confirmatory order passed in March 2015.
This was one of the few cases where the CMD of a company came under the scanner in an insider trading case.
A SEBI probe had found that Rajan had traded on the basis of unpublished price sensitive information pertaining to cancellation of two shareholder agreements of Gammon Infra with Simplex Infrastructure.
The tribunal had set aside the SEBI's order saying the information in itself was not price sensitive.
"Considering the minor proportion of the transaction to the turnover of GIPL (Gammon Infra), in our view the information cannot be termed as price sensitive information. Simplex had not even disclosed the said information to the stock exchanges," the tribunal had said.
Further, the tribunal had said that even if it is assumed that the information is price sensitive, "still the appellant cannot be blamed of insider trading for the reasons that he did not trade on the basis of the information".
The tribunal had noted that Rajan was able to show that he needed the money that he garnered from sale of shares for infusing capital in one of his firms that was undergoing corporate debt restructuring (CDR) during the time.
Besides, he was even required to sell his agricultural land and flat."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," the tribunal had said, adding that the amount was deposited in the account of CDR scheme.