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2018 (5) TMI 931 - SC - Companies LawSatyam Scam - Penalty for insider trading - Prohibition of Insider Trading Regulations, 1992 - appellant was roped in by the Whole Time Member of the SEBI as well as the Appellate Tribunal as he happened to be an executive director of SCSL from 1993 upto 31.8.2000 and a non-executive director from 1.9.2000 to 23.1.2003. He also happens to be the “co-brother” of B. Ramalinga Raju as the two of them have married two sisters - Held that:- We are of the view that from the mere fact that the appellant promoted two joint venture companies, one of which ultimately merged with SCSL, and the fact that he was a co-brother of B. Ramalinga Raju, without more, cannot be stated to be foundational facts from which an inference of reasonably being expected to be in the knowledge of confidential information can be formed. The fact that the appellant was to be continued as a director till replacement again does not take us anywhere. Shri Viswanathan has shown us that two other independent non-executive directors were appointed in his place on and from 23.1.2003. What is clear is that the appellant devoted all his energies to the businesses he was running, on and after resigning as an executive director of SCSL, as a result of which the salary he was being paid by SCSL was discontinued. Having regard to the findings contained in the minority judgment and the aforestated discussion, we are clearly of the opinion that this view is correct both in law and on facts and deserves our acceptance. Therefore, this appeal is allowed and the majority judgment of the Appellate Tribunal is set aside. The appellant company does not have persons who are relatives of persons mentioned in sub-clauses (vi), (vii) and (viii) – under these sub-clauses, a person is deemed to be a connected person if such person is a relative of persons in clauses (i) to (v); or is a banker of the company; or is a relative of a connected person. Since none of these clauses are attracted, it is obvious that Section 2(h)(ix) would also, as a matter of law, not be attracted in the facts of this case. In this view of the matter, this appeal also stands allowed. Consequently, the majority judgment of the Appellate Tribunal judgment is set aside. Appellant was neither a director nor a promoter of SCSL. The shares that were owned by this appellant in SCSL were sold by him from 5.2.2001 to 18.11.2004 - Held that:- While it is true that adjudication proceedings and criminal proceedings are separate proceedings, the relevance of the Special Court’s judgment is only for the purpose of showing that the second part of the definition of an “insider” is made out in the appellant’s case, for, if the appellant, along with his brothers, was party to the fraud practiced on the public, it is obvious that he was reasonably expected to have access to UPSI in respect of the securities of SCSL. This appellant’s case, therefore, stands apart from the other family members of B. Ramalinga Raju, in that the SFIO’s report as well as the aforesaid judgment clearly and unmistakably point to his complicity, unlike that of the other family members, in the fraud committed from 2001 onwards. This being the case, though for different reasons, we uphold the majority judgment of the Appellate Tribunal and dismiss this appeal.
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