UNPUBLISHED PRICE SESITIVE INFORMATION- CASE LAWS V. K. Kaul Vs SEBI

UNPUBLISHED PRICE SESITIVE INFORMATION- CASE LAWS

V. K. Kaul Vs SEBI

PURCHASE OF SHARES BY SOLREX

On the basis of alerts in BSE & NSE during March 17, 2008 to April 9, 2008, the SEBI took up joint investigation in the dealings of the scrip of Orchid Chemicals and Pharmaceuticals Ltd. (the target company). Solrex made large investments in the scrip of the target company from March 31, 2008 onward.

Mrs Kaul Dealing in Solrex Shares 

 It was noted that Mrs. Bala Kaul, wife of Mr. V. K. Kaul, had traded in the scrip of the target company ahead of large investments made by Solrex in the scrip of the target company. The funds for the said trading were provided by Mr. V. K. Kaul and trading was done through Religare Securities Limited, who is also the stockbroker of Solrex.

Ranbaxy is the parent company of Solrex Pharmaceuticals Limited and holding company of Rexcel Pharmaceutical Limited. Solrex is a company directly under the control of Ranbaxy.

INSIDER TRADING BY MRS KAUL

Mrs. Bala Kaul bought a total of 35,000 shares at an average price of Rs. 131.71 on 27th and 28th March 2008 and sold them on April 10, 2008 at an average price of Rs. 219.94. 

Unpublished Price Sensitive Information (UPSI)

This trading was allegedly done on the basis of Unpublished Price Sensitive Information (UPSI) available with Mr. V. K. Kaul to the effect that Solrex is going to invest large amounts in the scrip of the target company.

SALIENT POINTS IN THIS CASE 

The main Points in this case is as follows”

1.   Kaul was member of the Audit Committee.

2.  It is also interesting to note that the funds for investment for purchasing the scrip of the target company were made available by Mr. V. K. Kaul and the sale proceeds of the scrip were also transferred back to him.

3.  Instructions to the stockbroker for the transaction were also given telephonically by Mr. V. K. Kaul

SAT's DECISION 

SAT held that we, therefore, cannot find any fault with the findings arrived at by the adjudicating officer, SEBI that Mr. V. K. Kaul had traded in the scrip of the target company in the name of his wife when he was in possession of UPSI that Solrex was to purchase large number of shares of the target company for which funds were being arranged by Ranbaxy.

 Now , Applicable Regulation 

Suspected leakage of unpublished price sensitive information (UPSI)- Recent Amendment SEBI (Prohibition of Insider Trading) Amendment Regulations, 2018 on 31st December, 2018 and the amendments will take effect from 1st April, 2019.