Appellants cleared of insider trading allegations in IVL securities

The tribunal concluded that the appellants were not in possession of unpublished price sensitive information (UPSI) when they traded in the securities of IVL during the alleged UPSI period. The impugned orders were quashed, and the appeals were allowed with no order as to costs.

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Issues Involved:
1. Whether the appellants were in possession of unpublished price sensitive information (UPSI) when they traded in the securities of IVL.
2. Determination of the UPSI period.
3. Whether the appellants violated Regulation 4(1) of the SEBI (Prohibition of Insider Trading) Regulations, 2015.

Issue-wise Detailed Analysis:

1. Whether the appellants were in possession of unpublished price sensitive information (UPSI) when they traded in the securities of IVL:

The appellants were charged with trading while in possession of UPSI. Regulation 4(1) of the PIT Regulations prohibits insiders from trading in securities when in possession of UPSI. The appellants admitted to being insiders and trading during the alleged UPSI period but disputed the UPSI period and being in possession of UPSI.

The WTM concluded that the UPSI regarding the sale of ILPL by IDSL for more than Rs. 600 crores came into existence on January 24, 2017, and became generally available on March 15, 2017. However, the tribunal found this conclusion to be illegal and against the material evidence on record. The tribunal noted that the discussions on January 24, 2017, were related to a loan request, not a sale, and the intention to purchase ILPL by IIL came into existence only on March 1, 2017, when the EGM of IIL resolved to invest surplus funds by way of purchase of a company.

The tribunal also highlighted that the information regarding the sale of ILPL was already in the public domain since July 15, 2016, and was not treated as UPSI by the WTM. Thus, the trades executed by the appellants between July 15, 2016, to March 1, 2017, could not be based on UPSI, and the appellants were not in possession of UPSI during the alleged UPSI period.

2. Determination of the UPSI period:

The WTM determined the UPSI period to be from January 24, 2017, to March 14, 2017. However, the tribunal found that the UPSI regarding the purchase of ILPL by IIL came into existence for the first time on March 1, 2017, when the shareholders of IIL resolved to invest surplus funds by way of purchase of a company. Therefore, the UPSI period could only start from March 1, 2017, onwards till March 14, 2017.

The tribunal also noted that the information regarding the sale of ILPL was already in the public domain since July 15, 2016, and was not treated as UPSI by the WTM. Therefore, the decision to sell ILPL was not a price-sensitive information nor was it an UPSI.

3. Whether the appellants violated Regulation 4(1) of the SEBI (Prohibition of Insider Trading) Regulations, 2015:

The tribunal found that the appellants were not in possession of UPSI when they purchased the shares of IVL during the alleged UPSI period. The appellants successfully discharged the burden under the proviso to Regulation 4 of the PIT Regulations. The tribunal noted that the appellants were not privy to any inside information and were therefore not in possession of UPSI.

The tribunal also highlighted that the WTM's reliance on the fact that appellant Pia Johnson was a member of the managing committee was insufficient to conclude that she had inside information. The tribunal found that no meeting of the managing committee was ever held, and there was no finding that the resolution of IIL on March 1, 2017, or notice dated January 25, 2017, or resolution of the Board of Directors of IREL on February 3, 2017, was known to the appellants.

The tribunal also considered the statements of the two CEOs of IVL and IREL, which indicated that the information regarding the sale of ILPL was not made known to others, and the appellants had no knowledge of the deal.

Conclusion:

The tribunal concluded that the appellants were not in possession of UPSI when they traded in the securities of IVL during the alleged UPSI period. The impugned orders were quashed, and the appeals were allowed with no order as to costs.

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