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TMI Blog2011 (11) TMI 781X X X X Extracts X X X X X X X X Extracts X X X X ..... are directed against a common order dated October 29, 2010 passed by the adjudicating officer imposing monetary penalties on the appellants for violating regulations 3 and 4 of the regulations and clause 2.1 in Schedule II to the regulations and are being disposed of by this order. Since the main arguments were addressed in Appeal no. 207 of 2010, the facts are being noticed from this appeal. 2. FCGL Industries Ltd. is a public limited company whose shares are listed on Bombay Stock Exchange Ltd., Mumbai (for short BSE) and Calcutta Stock Exchange, Kolkata. It shall be referred to hereinafter as FCGL. It is a core investment company having more than ninety per cent of its assets as investment in associated or group companies. As on June 30, 2005, it was holding 1,67,09,824 shares of Gujarat NRE Coke Ltd. (for short the Coke company) constituting 17.716 per cent of its total paid-up equity capital. The board of directors of FCGL in their meeting held on July 4, 2005 decided to acquire coal mining leases in Australia through a special purpose vehicle which was registered as a company in Australia under the name and style of "Gujarat NRE FCGL Pty Ltd." It was a joint venture of FCGL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , by Shri G. L. Jagatramka and Shri A. K. Jagatramka who are the chairman and director respectively of FCGL. Soon after the board meeting was over, FCGL made on the same day a corporate announcement to BSE informing the latter about the agreement to acquire the coal mining leases in Australia. BSE had also been informed that the cost of acquisition and development of the mines would be around 80 million Australian Dollars. It is common case of the parties that in pursuance to the board decision, FCGL sold 84,79,709 shares of the Coke company between July 18, 2005 and September 29, 2005 for the purpose of raising funds for acquiring coal mining leases in Australia. The corporate announcement did not mention about the decision of FCGL to dispose of its investment in the Coke company to raise funds for the acquisition. This non-disclosure has been taken by the Securities and Exchange Board of India (for short Sebi) as a serious violation of the regulations and also of clause 2.1 of the Code of Corporate Disclosure Practices specified in Schedule II to the regulations. At this stage it would be relevant to reproduce the press lease issued by the Coke company on behalf of FCGL being its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jagatramka who attended the board meeting of FCGL on July 4, 2005 were also the directors of Matangi and Marley which were persons acting in concert with the promoters and directors of FCGL. Investigations further revealed that Marley had purchased 3,00,000 shares of FCGL and Matangi purchased 50,000 shares of FCGL during the quarter ending September, 2005. This, according to Sebi, was in violation of regulations 3 and 4 of the regulations and clause 2.1 of the Code of Corporate Disclosure Practices for prevention of insider trading as prescribed by the regulations. Sebi decided to initiate adjudication proceedings against Matangi, Marley, G. L. Jagatramka and A. K. Jagatramka alleging that Matangi and Marley had violated regulations 3 and 4 of the regulations and the two Jagatramkas had violated clause 2.1 of Schedule II to the regulations in addition to violating regulations 3 and 4. Separate, though identical, show cause notices all dated July 1, 2009 were issued to these four persons calling upon them to show cause why monetary penalty be not imposed on them under sections 15G and 15HB of the Securities and Exchange Board of India Act, 1992 (hereinafter called the Act). Separa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities or buy-back of securities; (iv) any major expansion plans or execution of new projects; (v) amalgamation, mergers or takeovers; (vi) disposal of the whole or substantial part of the undertaking; and (vii) significant changes in policies, plans or operations of the company; (i) ........................................ (j) ...................................................... (k) "unpublished" means information which is not published by the company or its agents and is not specific in nature. Explanation.- Speculative reports in print or electronic media shall not be considered as published information; (l) .................................................................... 3. No insider shall - (i) either on his own behalf or on behalf of any other person, deal in securities of a company listed on any stock exchange any unpublished price sensitive information; or (ii) communicate counsel or procure directly or indirectly any unpublished price sensitive information to any person who while in possession of such unpublished price sensitive information shall not deal in securities: Provided that nothing contained above shall be applicable to any communica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hange(s) where its securities are listed. Such decisions of an investment company, in our opinion, do not affect the price of its securities. The explanation to the definition has seven clauses and information in regard to all those matters is treated as price sensitive. The adjudicating officer has placed strong reliance on clause (vi) thereof which deals with "disposal of the whole or substantial part of the undertaking". These words would mean when a company decides to dispose of the whole or substantial part of its business activity or project in which it is engaged. The word 'undertaking' cannot possibly mean investments held by an investment company which are its stock-in-trade. To illustrate, if a manufacturing company were to dispose of the whole or a substantial part of its manufacturing unit, it would be an event which would materially affect the price of its securities and according to the explanation it would be price sensitive requiring the company to make the necessary disclosures at the earliest. On the other hand, if a manufacturing company were to sell its products or buy raw materials, it would be a part of its normal business activity which would not be price sen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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