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2020 (1) TMI 365 - AT - SEBIDelayed disclosure of material informations as required under Clause 36 of Listing Agreement read with Section 21 of the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as, "SCRA'') and trading in the scrip of appellant - Washington Warning, China Announcement - HELD THAT:- It is to be noted that while having the negative information of slapping of the warning, the appellant sold shares of Jubilant Life Sciences on February 25, 2013. His explanation for the same is that he required funds for renovation of his house is not substantiated by any material on record. As argued before us that for penalizing a person for insider trading, SEBI has to establish that the appellant has traded "on the basis of" the unpublished price sensitive information as provided by Section 15G of the SEBI Act as quoted above. On the other hand, the AO has relied on the provisions of Regulation 3 of the PIT Regulations as amended in 2002 which provided that only "having possession of" unpublished price sensitive information is sufficient to attract the provisions. Prior to 2002, the Regulation 3 was on the line of the provisions of Section 15G of the SEBI Act, which provided that the insider trading in securities should be "on the basis of" unpublished price sensitive information. It has been now established by the catena of cases that even if the penalty would be imposed only when the trading is done "on the basis of" any unpublished price sensitive information, the person against whom the charges are levelled will have to show that the trading was not done on the basis of the information but for other reasons, since the explanation would be especially within his own knowledge. In the present case, the appellant provided the explanation which remained uncorroborated. Non-closure of the trading window during the period or non action by SEBI on this count is irrelevant. It is established that the present appellant being a Vice President of Jubilant Life Sciences had sold shares when adverse information reached him and purchased when positive news reached him when both remained to be published. AO has provided the table of price fluctuation in the scrip to show that the warning letter had adverse impact while the acceptance letter on positive impact had the positive impact on the prices. Besides this, the AO has rightly noted that this factor is irrelevant. In this view of the matter, the appellant would be guilty of insider trading. AO has imposed penalty of ₹ 10 lacs on each of the appellants Jubilant Life Sciences, Jubilant Stock Holding, Shyam Sunder Bhartia and Hari Shankar Bhartia and Amit Arora equally. The reasoning forwarded by the AO was that though the gains for the violation cannot be estimated, the violations being in the nature of detrimental to the investors, adversely impacting the equilibrium of the fair market. The appellant in Jubilant Life Sciences would be liable for penalty only on one count i.e. for non-disclosure of the China warning immediately. The penalty accordingly is reduced to ₹ 5 lacs.
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