TaxTMI 
TaxTMI 
2011 (12) TMI 730
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....lty of violating section 12A (d) and (e) of the Securities and Exchange Board of India Act, 1992 (for short the Sebi Act) read with Regulation 3(i) and 4 of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 (for short the Insider Trading Regulations) and imposing a penalty of Rs.3 lacs on the appellant. 2. The facts of the case, in brief, are that the Board carried out investigation into the trading of the scrip of Hindustan Dorr Oliver Limited (the company) for the period from February 2, 2009 to March 25, 2009 and found that Mr. E. Sudhir Reddy, the appellant before us, who was also the non executive Vice Chairman and Director of the company, traded in the scrip of the company while he was in ....
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....'insider trading' is generally used in the negative sense as it is perceived that the persons having access to the price sensitive and unpublished information use the same for their personal gain. Section 12 A of the Sebi Act makes provision for prohibition of manipulative or deceptive devices, insider trading and substantial acquisition of securities and, inter-alia, provides that no person shall directly or indirectly engage in insider trading or deal in securities while in possession of material or non-public information. Regulation 4 of the Insider Trading Regulations provides that any insider who deals in securities in contravention of the provisions of regulation 3 and 3A shall be guilty of insider trading. Regulation 3(i) of the said....
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....25, 2009. It was argued by the learned senior counsel for the appellant that the contract was awarded to the company after a long drawn process of inviting tenders, submission of technical bids, submission of financial bids, issue of LOI etc and, therefore, it was already in public domain and hence the information was not price sensitive. The price sensitive information was the award of contract on February 24, 2009 and this information was disseminated to the stock exchanges on February 25, 2009. Prior to the award of the contract to the company by UCIL, the appellant was not in possession of any unpublished price sensitive information and, therefore, by purchasing 19,721 shares on February 9/10, 2009, the appellant has not violated the pr....
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....ding bagging of the contract for uranium ore processing plant from UCIL was price sensitive information. Being a director of the company, he was privy to the developments taking place. The company was declared the lowest bidder as early as on January 27, 2009 and final meeting of UCIL and the company officials took place on February 9, 2009 and on the same day the appellant placed order for purchase of the shares. The appellant being an insider had traded in the scrip of the company while possessing/holding unpublished price sensitive information. It was submitted by the learned counsel for the respondent that the order passed by the adjudicating officer calls for no interference. 7. We have given our thoughtful consideration to the submi....
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....etrimental to the interest of the ordinary shareholders of the company and general public. It is with a view to curb such practices that section 12A of the Sebi Act makes provisions for prohibiting insider trading and the Board also framed the Insider Trading Regulations to curb such practice. 8. Examined in this background, we find that the appellant being one of the directors of the company, was a connected person with the company and falls within the definition of 'insider' contained in regulation 2(e) of the Insider Trading Regulations. It is also not in dispute that he purchased 19,721 shares as on February 9/10, 2009 when in possession of information that the company was declared the lowest bidder for the project in question. Accept....
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....gh stock exchanges on February 25, 2009. There is no doubt that the appellant was privy to the information even before it was put in public domain by way of the above publication. That being so, we do not find any infirmity in the order passed by the adjudicating officer holding the appellant guilty of violating Section 12A (d) and (e) of the Sebi Act read with regulation 3(i) and (4) of the Insider Trading Regulations. In Appeal no.107 of 2011 in the case of the company involving same transactions and decided by us on October 19, 2011, the charge against the company was different. In that case the charge against the company was of violating the model code of conduct by not closing its trading window for prevention of insider trading. In th....