BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No. 4 of 2012
Date of decision: 26.03.2012 Mr. G. Jayaraman
Residing at Plot No. 67, Phase-III,
Bhaskar Rao Nagar,
Sainikpuri (PO),
Secunderabad – 500 094.
… Appellant
Versus
Securities and Exchange Board of India
SEBI Bhavan, Plot No.C-4A, ‘G’ Block,
Bandra Kurla Complex, Bandra (East),
Mumbai – 400 051.
… Respondent
Mr. Somasekhar Sundaresan, Advocate with Mr. Ravichandra Hegde, Advocate and
Mr. Anand Lakra, Advocate for the Appellant.
Mr. Shiraz Rustomjee, Senior Advocate with Mr. Mihir Mody, Solicitor, Mr.Mobin
Shaikh, and Mr. Rushin Kapadia, Advocates for the Respondent.
Coram : P. K. Malhotra, Member
S.S.N. Moorthy, Member
Per : P. K. Malhotra, Member (Oral)
This appeal has been filed against the order dated November 29, 2011 passed by
the adjudicating officer of Securities and Exchange Board of India (for short the Board)
imposing a penalty of Rs.5 lacs on the appellant under Section 15HB of the Securities
and Exchange Board of India Act, 1992 for violating clauses 1.2 and 3.2-3 in Part A of
Schedule I prescribing the Code of Conduct for the companies under Regulation 12 of
the Securities and Exchange Board of India (Prohibition of Insider Trading)
Regulations, 1992 (for short the Regulations).
- The appellant before us is company secretary of Satyam Computer Services Ltd.
(the company) since the year 2000 and was also designated as the compliance officer of
the company with effect from August 10, 2001 for the purposes of the said Regulations. 2
Investigations carried out by the Board revealed that the company considered
acquisition of Maytas Infra Limited and Maytas Properties Limited in its meeting held
on December 16, 2008 which was subsequently withdrawn on December, 17, 2008.
Intimation in this regard was sent to the stock exchanges but the trading window was
not closed in accordance with the provisions of the Regulations when this price
sensitive information was unpublished. It was alleged that the appellant, being the
compliance officer and one of the key personnel of the company, had the responsibility
to close the trading window on all occasions warranting such closure other than when it
was automatically closed for the release of financial statements, etc. A show-cause
notice dated September 27, 2011 was issued to the appellant asking him to show cause
as to why inquiry should not be held against him and penalty imposed for the said
contravention. The appellant denied the charges. The adjudicating officer after holding
an inquiry and granting personal hearing, held the appellant guilty and imposed the
penalty as mentioned above. Hence this appeal.
- We have heard the learned counsel for the parties and are of the view that the
matter needs to be reconsidered by the Board. It was strenuously contended by the
appellant before us as well as before the Board that the decision regarding the subject
acquisition was still at a proposal stage which was premature to close the trading
window as per provisions of regulation 3.2 of the Regulations. The trading window
could be shut only when information actually exists and not on speculative grounds.
The adjudicating officer while passing the order has not given any finding on the issue
as to on which date the price sensitive information regarding proposal for acquisition of
Maytas Infra Limited and Maytas Properties Ltd. became price sensitive. It is a cardinal
principle of law that before a person can be held guilty of violating a regulatory
provision, it must be brought on record as to on which date the said violation took place.
The adjudicating officer has not recorded any finding to that effect. It is seen from the
record that a notice convening the meeting of the Board on December 16, 2008 was sent
out on December 13, 2008. However, agenda for the board meeting was not enclosed
along with the notice and was not known to the appellant. It is on the evening of 3
December 15, 2008 that the appellant received details and the agenda for the board
meeting from Mr. Ramalinga Raju, the executive chairman of the company. The board
meeting was held at 2 p.m. on December 16, 2008 and concluded at 5 p.m. on the same
day. The outcome of the board meeting was immediately intimated to the stock
exchanges. The information with regard to the decision taken in the board meeting
became public when it was intimated to the stock exchanges. The adjudicating officer
while arriving at a conclusion has not given his finding as to the date on which the
trading window was required to be closed – whether it was December 13, 2008 on
which date the notice convening the board meeting was sent out or the evening of
December 15, 2008 when the detailed agenda was uploaded for the board meeting or
there was any other date on which the appellant became privy to the said price sensitive
information. In the absence of any such finding, the impugned order cannot be upheld.
- We, therefore, set aside the impugned order and remand the matter to the
adjudicating officer for recording his findings afresh within a period of two months
from the date of receipt of this order, if need be, after affording an opportunity of
hearing to the appellant. We make it clear that we are not expressing our view on the
merits of the case which shall remain open and the adjudicating officer is free to re-
examine the matter in the light of the material available on record and such other
material that may be placed before him during the course of hearing, if any.
The appeal stands disposed of accordingly with no order as to costs.
Sd/-
P. K. Malhotra
Member
Sd/-
S.S.N. Moorthy
Member
26.03.2012
Prepared & compared by-ddg