TaxTMI 
TaxTMI 
2025 (5) TMI 1149
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....2015^6. 2. Brief facts of the case are as under :- (i) The appellant No. 1 Reliance Industries Limited (RIL) and Facebook Incorporation (Facebook) were in preliminary discussions of investments by Facebook in Jio Platforms Limited (JPL), a subsidiary of RIL. Appellant No. 2 and Appellant No. 3 are Compliance Officers of RIL. (ii) On September 30, 2019, RIL and Facebook executed a confidentiality and non-disclosure agreement and on March 4, 2020 executed a non-binding term-sheet. (iii) During the period of negotiations and due diligence, on March 24, 2020, the Financial Times, London published a news article which stated that "Facebook was close to signing a preliminary deal for a 10 per cent share in Reliance Jio." This news with different headings was also published on the same day by Reuter, Economic Times, Business Today and Mint. The above news contents were then published by Indian media houses on the same day and the next day. Some of these articles reported that RIL had declined to comment on the matter. (iv) On April 18, 2020, the Board of directors of RIL and JPL approved the execution of the transaction documents in connection with t....
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....basis of market capitalization, as at the end of the immediately preceding financial year. " At the relevant time Regulation 30(11) in juxtaposition with Regulation 30(10), was clearly discretionary and did not impose any mandatory obligation on the appellants to confirm or deny any reported event or information. Such an obligation to verify market rumours by the listed entities was introduced by SEBI in July 2023 by way of amendment to LODR Regulations and said regulations brought into effect from June 1, 2024 for top 100 listed entities and later for top 250 listed entities from April 1, 2024. The insertion is in the nature of a substantive amendment, which is a new obligation on specified entities. To support this submission, he relied on Vidarbha Industries Power Limited v. Axis Bank Limited^7. Further, where the legislature has in successive provisions used both "may" and "shall", it clearly conveys that the former is discretionary while latter is mandatory. To support this submission, he relied on M/s Mahaluxmi Rice Mills & Ors v. state of U.P.& Ors^8; Jamatraj Kewalji Govani v. The State of Maharashtra^9; Labour Commissioner, Madhya Pardesh v. Burhanpur Tapti Mills ....
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....; contention that the information was not leaked by the appellant is irrelevant as there is no allegation to this effect. In as much as Principle 4 is worded very widely and clearly includes information that gets disclosed "inadvertently or otherwise." It is therefore not necessary that the obligation to make disclosure arises only when the information is leaked by the company or somebody working with the company. (e) Principle 4 cannot be eclipsed by referring to Principle 1. Each Principle has its own purpose. If the disclosure requirement is only upon the information becoming credible and concrete, then Principle 4 would be rendered nugatory. (f) That the disclosure requirements under PIT Regulations and the disclosure requirements under the LODR Regulations are separate and independent requirements arising under the respective regulations. The stringent requirement under PIT Regulations cannot be diluted or ignored by referring to the requirements under the LODR Regulations. (g) That the appellant's interpretation with respect to Regulation 30 (11) of LODR Regulations was accepted by the AO, but that by itself does not exonerate the appellant of t....
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....s also found that it is a market practice to make relevant disclosures of even non-binding term sheets etc. Any private confidentiality agreement cannot override the PIT Regulations or that the binding agreement has not been executed is not an excuse not to comply with Principle No. 4 for prompt dissemination of UPSI. In support of this submission, he relied on Basic v. Levison^11 . (k) That the appellants relied upon the Circulars issued by NSE and BSE "Disclosure of Unpublished Price Sensitive Information by Listed Companies" in support of the interpretation of the relevant regulations, which is based on a selective reading of the Circulars. The Circulars read in their entirety make it clear as to obligation of disclosure under Schedule A to PIT Regulations. A newspaper and its readers are third parties for the purpose of BSE/NSE Circulars and if confidential UPSI gets disclosed, even inadvertently, then it needs to be mandatorily disseminated. Thus, the appellants are bound to make disclosure under the principles laid down in Schedule A to the PIT Regulations, not only under Principle No. 4 but also Principle 5. Stock exchanges have issued a general directive to the lis....
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....ares by the Facebook group in the Jio Telecom, even before completion of final valuation, is a materially price sensitive information within the ambit of PIT Regulations, at any stage. This was well proved by the fact that there was 15% rise in market price of RIL scrip, when the said information got disclosed in international print media even though due diligence was not completed and valuation was not agreed to by both sides. (2) Just like any other cross-border investment transactions, the discussion between two sides was followed by execution of NDA / confidentiality agreement and exchange of broad terms of investments by RIL, which were discussed till February 27, 2020 and on agreement thereon, resulted in a final term sheet on March 4, 2020. Thereafter, due diligence for valuation purpose started on March 7, 2020 with JPL giving data room access to Facebook, enabling both sides to carry out respective valuations. The information at this stage got disclosed by unknown persons before the due diligence / final valuation was to be completed. (3) The information about the deal was classified as UPSI by RIL with entries made in Structured Digital Database (SDD) si....
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....d the LODR Regulations requiring continuous disclosure of event and information, that are specified or treated as material thereunder. However, all material information under LODR may not be price sensitive for the purpose of PIT regulations. Conversely, merely because material information is required to be disclosed to the stock exchanges, it cannot be held to be UPSI. What is 'price sensitive' is essentially 'material', but the converse is not true. Reference in this regard may be made to paragraph 31 of the Report of the High-Level Committee to review the SEBI (Prohibition of Insider Trading) Regulations, 1992 (TK Vishwanathan committee), which mentions that 'no piece of information should mandatorily be regarded as price sensitive'. 6.3.2 This Tribunal in Anil Harish v. SEBI^16, has held that if certain information is bound to be disclosed to a stock exchange under listing agreement, the information is not necessarily a price sensitive information. On the contrary, price-sensitivity is to be determined solely on the basis of its impact upon the price. In Gujarat NRE Mineral Resources v. SEBI^17, it is held by this Tribunal that a transaction of divest....
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....Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information "1. Prompt public disclosure of unpublished price sensitive information that would impact price discovery no sooner than credible and concrete information comes into being in order to make such information generally available. 2. Uniform and universal dissemination of unpublished price sensitive unpublished price sensitive information to avoid selective disclosure. 3. Designation of a senior officer as a chief investor relations officer to deal with dissemination of information and disclosure of unpublished price sensitive information. 4. Prompt dissemination of unpublished price sensitive information that gets disclosed selectively, inadvertently or otherwise to make such information generally available ". In our view, the entire scheme of Schedule - A is very well integrated. Principle 1 makes it obligatory on the part of listed entity to make prompt disclosure of UPSI, as soon as it comes into being as a concrete and credible information, to make it generally available (in contrast with selectively made available). For this purpose, Principle-....
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....in Blacks Law dictionary 4th Edition at page 440 as under: "Worthy of belief; entitled to credit". The term 'concrete' is defined in Oxford advance dictionary as under: 'based on facts, not on ideas or guesses' Oxford learner's dictionary defines the term 'concrete' as under: 'Real or definite not existing only in imagination'. 6.3.7.2 In the light of the above, whether the information in question was 'credible' and 'concrete' or not may be examined in the light of the following key events / milestones relating to the deal, reported in the impugned order :- Date Events / Discussions (Phone / meetings, etc.) Particulars (Details of matters discussed) 01/09/2019 Initial discussion of the intent to explore a potential transaction with Facebook Inc. Initial Discussion 10/09/2019 Entries made in structured digital database "SDD" Entries made in structured digital database "SDD" 30/09/2019 Execution of Confidentiality and Non-Disclosure Agreement between RIL and Facebook Inc. Confidentiality and Non- Disclosure Agreement with Facebook Inc. 30/10/2019 to 31/10/201....
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....eeting of RIL, JPL, RRL and RJIL - Approval for entering into transaction documents in connection with the proposed investment of 9.99% by Facebook Inc. in JPL Approval for entering into the transaction documents 21/04/2020 (US) Transaction documents executed on behalf of RIL and JPL by Mr. Mathew Oommen- Non-Executive Director, RJIL at Dallas Execution of Transaction documents 22/04/2020 RIL informed to the stock exchanges about the media release titled "Facebook to invest Rs. 43574 crore in Jio Platform for a 9.99% Stake" wherein they have announced signing of binding agreements between RIL, JPL and Facebook Inc. for an investment of Rs. 43,574 crore by Facebook into JPL which will translate into a 9.99% equity stake in JPL Corporate announcement 6.3.7.3 In our considered view, the fact that the two major global conglomerates decided to go for cross-border investment of significant amount, which required discussion/nod at the highest level in both groups, shows that the information was highly credible for the company and its insiders. Eventually, the company RIL had entered into SDD and both sides had signed NDA / confidentiality agreement way back on Sept....
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....her plea that there was no need to disclose any information, since the information was already got disclosed in Media and was already 'generally available'. However, this plea is devoid of merit, as it is the responsibility of the company to give clarity on the matter to the investors and public at large with a credible and concrete explanation. In the absence of this, such a speculative information would keep floating around, which may break the integrity of the securities market. If at this stage, the appellant had disclosed the basic facts about the deal clarifying that no binding agreement has been signed, it would have settled the dust and stabilized speculative trends. In our view, selective leakage of the information, howsoever accurate or otherwise or complete or in bits and pieces, does not discharge the company from its responsibility of making prompt disclosure to make it generally available, moreso when such information has been classified by company as UPSI. Till the information is disclosed by the company, it remains unauthenticated. The information leaked to news agencies remains selectively available to their subscribers / readers only and cannot be held ....
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....s have extensively debated on LODR Regulations specifically whether Regulation 30(11) is discretionary or mandatory. The respondent's case is that while a listed entity shall be bound to disclose the information to the exchange when called upon to do so, it 'may' on its own initiative also do the same and, therefore, when read together it makes obligatory on the company to make suo motu disclosure, where it has not been asked by the regulator. The appellant's plea is based on interpretation of Regulation 30(10) independent of Regulation 30(11). We are in agreement with Mr. Sancheti that correct interpretation of Regulation 30(11) can be made when read in juxtaposition with Regulation 30(10). The term 'may' used in Regulation 30(11), when read with Regulation 30(10) provides for compliance by the listed entity in the given circumstances, whether in response to any query raised by the exchange or otherwise. Here, 'may' needs to be read as an adjunct to mandatory requirement of Regulation 30(10). This requirement was applicable to all listed entities till the beneficial proviso brought in w.e.f. June 14, 2003, restricted its applicability to only top 10....