TMI Blog2016 (7) TMI 1660X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions entered into between CICPL and Shri Abhijit Rajan were registered within the permissible statutory limit permitted by law. While it is possible that discussions in respect of the property transactions entered into between CICPL and Shri Abhijit Rajan may have been happening a few months prior to the impugned trades, no material evidence has been placed before me in the instant proceedings in support of such negotiations actually taking place prior to the execution of said trades. In the aforementioned context, the allegations against CICPL and its Directors as contained in the SCN, are not supported by any material evidence. On the other hand, CICPL and its Directors have substantiated their contention regarding the need for urgent sale of GIPL shares with the support of documentary evidence. No alternative but to find that the charges against CICPL and its Directors i.e. Shri Kiran Indru Hingorani and Shri Indru B. Hingorani, as alleged in the SCN, have not been made out on the basis of the material available on record. For the aforementioned reasons, we are constrained to give the benefit of doubt to CICPL and its Directors i.e. Shri Kiran Indru Hingorani and Shri Indru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trading in the scrip of Gammon Infrastructure Projects Limited ( GIPL ) for the period from August 1 September 30, 2013, pursuant to receipt of an input from the National Stock Exchange of India Limited ( NSE ) concerning the possibility of certain clients having traded in the said script on the basis of unpublished price sensitive information ( UPSI ). 1.2 The prima facie findings of the preliminary inquiry are reproduced as under i. GIPL is an infrastructure project development company (incorporated on April 23, 2001, as Gammon Infrastructure Projects and Investments Limited and subsequently renamed as Gammon Infrastructure Projects Limited on April 1, 2002). ii. The shareholding pattern in GIPL for the quarters ending June 2013; September 2013 and December 2013 [Source Bombay Stock Exchange ( BSE ) website], were as follows June 2013 September 2013 December 2013 No. of Shareholders No. of Shares % No. of Shareholders No. of Shares % ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Directors of GIPL passed a resolution authorizing the termination of the SHAs entered into between GIPL and Simplex. viii. On August 22, 2013, Shri Abhijit Rajan sold approximately 144 Lakh shares held by him in GIPL (representing 70.56% of his shareholding in that company as on August 22, 2013) for an aggregate value of approximately ₹10.28 Crores. ix. The trade volume of Shri Abhijit Rajan in the scrip of GIPL on August 22, 2013, is provided below Stock Exchange No. of Shares Sold By Shri Abhijit Rajan BSE 7229985 NSE 7150000 14381246 x. On August 30, 2013, the Termination Agreements entered into between GIPL and Simplex were signed by the aforesaid entities. xi. On September 3, 2013, GIPL made a disclosure to the Stock Exchanges i.e. National Stock Exchange of India ( NSE ) BSE, regarding termination of the aforementioned SHAs dated April 26, 2012, with Simplex. xii. Vide e mails dated June 21, 2014 and June 27, 2014, GIPL informed SEBI that telephonic discuss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d (e) of the SEBI Act and Regulation 3(i) read with Regulation 4 of the PIT Regulations, 1992 11. In view of the foregoing, I am of the prima facie view that this is a fit case where pending investigation, urgent action is required to be taken by way of an ad interim ex -parte order. Therefore, in order to protect the interest of investors and the integrity of the securities market, I, in exercise of the powers conferred upon me under Section 19 read with Section 11(1), Section 11(4) and Section 11B of the SEBI Act, pending investigation in the matter, hereby restrain Mr Abhijit Rajan (PAN- AAEPR0342J) from buying, selling or dealing in securities and accessing the securities markets, either directly or indirectly, in any manner whatsoever, till further directions. 13. Mr Abhijit Rajan may file his reply, if any, to SEBI within 21 days from the date of receipt of this order and, if he so desires, avail an opportunity of personal hearing on a date, place and time fixed in that regard by Securities and Exchange Board of India. Confirmatory Order dated March 23, 2015 1.4 Subsequent to Shri Abhijit Rajan being granted an opportunity o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Mr. Indru Hingorani may divert the unlawful gains (subject to the adjudication of the allegation on the merits in the final order), which may result in defeating the effective implementation of the direction of disgorgement, if any to be passed after adjudication on merits. Non-interference by the Regulator at this stage would therefore result in irreparable injury to interests of the securities market and the investors. It therefore becomes necessary for SEBI to take urgent steps of impounding and retaining the proceeds (unlawful gains) allegedly made by the above Noticees, by way of an interim measure. Considering the facts and circumstances of the case, the balance of convenience lies in favour of SEBI. 14. Accordingly, as an interim measure, an Ad-Interim Ex-Parte Order for impounding such alleged gains under Section 11(4)(d) of the SEBI Act needs to be issued against the 4 Noticees tabulated below. Sr. No. Name Permanent Account Number 1. Abhijit Rajan AAEPR0342J 2. Consolidated Infrastructure Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PARTICIPANTS Second Week of July 2013 Telephonic discussion. Termination of the tie up between Simplex and GIPL. i. Mr. K.K. Mohanty, MD (GIPL) and ii. Mr. Rajiv Mundhra, MD, Simplex. July 29, 2013 August 28, 2013 E mails exchanged between GIPL and Simplex culminating in the finalization of the termination terms and a decision to execute the Termination Agreement on August 30, 2013. i. Mr. K.K. Mohanty MD (GIPL) ii. Mr. Atulesh Sharma (Technical Head, GIPL) iii. Pravin Satpute (Project Coordinator GIPL) iv. Neeraj Vijay Head Roads, GIPL v. Mr. Prakash Naik, Head Legal, GIPL) vi. Mr. Rajeev Mundra (MD, Simplex) vii. Mr. Salil Chakrvarty, (Director Maa Durga) viii. Mr. Kunj Rajgaria (Manager Finance, Simplex) ix. Mr. Atindra Basu (Director Maa Durga). August 7, 2013 Circulation of Agenda for Board meeting to be held on August 9, 2013. Agenda included item Disassociation with Simplex Infrastructure in Vijayawada Gundugolanu Project and Maa Durga Project. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 0 NA 0 Total 0 0 NA 0 During the UPSI Period (July 8, 2013 to September 2, 2013) Client Name Buy Quantity Sell Quantity Sell Date Net Abhijit Rajan 0 14381246 August 22, 2013 14381846 CICPL 0 2856618 August 6, 2013 2856618 Total 0 17238464 NA 17238464 After UPSI Period (September 3, 2013 to September 30, 2013) Client Name Buy Quantity Sell Quantity Sell Date Net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed entities and passing on information pertaining to termination of SHAs. Shri Abhijit Rajan replied to the summons vide letter dated December 5, 2014, stating that since he needed to infuse funds in GIL, the parent company of GIPL as part of a Corporate Debt Restructuring ( CDR ) Scheme, he had entered into transactions in the scrip of GIPL. The price sensitive information was made public on September 3, 2013. Shri Abhijit Rajan could have sold shares on any day after September 4, 2013, if there was indeed any urgency to infuse funds. Therefore, it was alleged that Shri Abhijit Rajan sold the shares prior to the announcement of termination of SHAs being made public on September 3, 2013, to avoid any loss that may arise on account of possible adverse impact of the announcement on the price of the scrip of GIPL. vii. CICPL sold approximately 28.57 Lakh shares during the UPSI period. In its letter dated September 2, 2015, CICPL stated that they were introduced to Shri Abhijit Rajan around August, 2013. CICPL had acquired several properties from Shri Abhijit Rajan for an aggregate consideration of approximately ₹5.15 Crores on August 28, 2013. However, neither Shri Abhijit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossession of UPSI,CICPL and its Directors i.e. Shri Kiran Indru Hingorani and Shri Indru B. Hingorani, violated Section 12A(d) and (e) of the SEBI Act. Proceedings pursuant to the Show Cause Notice dated March 29, 2016 3.1 Replies to the SCN were made as under i. Shri Abhijit Rajan filed his reply vide letter dated April 22, 2016; ii. CICPL and its Directors i.e. Shri Kiran Indru Hingorani and Shri Indru B. Hingorani, filed their reply vide letter dated May 24, 2016. 3.2 In conformity with the principles of natural justice, an opportunity of personal hearing was granted as under i. To Shri Abhijit Rajan on May 12, 2016; ii. To CICPL and its Directors i.e. Shri Kiran Indru Hingorani and Shri Indru B. Hingorani, on May 27, 2016. 3.3.1 For the hearing held on May 12, 2016, Shri Abhijit Rajan appeared before me through his Advocates. During the aforementioned hearing, Shri Abhijit Rajan was directed to submit the following information, viz. i. Explanation for the source of funds indicated at paragraph 12.1 of the SCN i.e. details of amounts infused by Shri Abhijit Rajan in GIL, the parent company of GIPL, as part of the CD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n end forthwith without reference to this Tribunal. Consideration of Issues 4.1 I have considered the Interim and Confirmatory Orders; the SEBI Order dated March 21, 2016; the SCN dated March 29, 2016; replies/submissions made by Shri Abhijit Rajan; CICPL and its Directors; additional submissions (both written and oral) made by them during the personal hearing before me alongwith the documents submitted by them and all other relevant material available on record. In light of the same, I shall now proceed to deal with the merits of the case. 4.2 The issues for determination in the instant proceedings are as under i. Whether the information regarding the termination of SHAs entered into between GIPL and Simplex, was a price sensitive information? ii. Whether Shri Abhijit Rajan comes under the definition of insider as per Regulation 2(e)(i) of the PIT Regulations, 1992? iii. Whether the trades executed by Shri Abhijit Rajan in the scrip of GIPL during the Investigation Period were done while in possession of UPSI i.e. the termination of SHAs entered into between GIPL and Simplex? By doing so, whether Shri Abhijit Rajan avoided any pot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gage in insider trading; (e) deal in securities while in possession of material or non-public information or communicate such material or non-public information to any other person, in a manner which is in contravention of the provisions of this Act or the rules or the regulations made thereunder; 4.4 The aforementioned provisions of the PIT Regulations, 1992, were repealed by the PIT Regulations, 2015. However, as per Regulation 12(2)(a) of the PIT Regulations, 2015, the previous operation of the PIT Regulations, 1992 or anything duly done or suffered thereunder, any right, privilege, obligation or liability acquired, accrued or incurred under the repealed regulations, any penalty, forfeiture or punishment incurred in respect of any offence committed against the repealed regulations, or any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, shall remain unaffected as if the repealed regulations had never been repealed. Further, as per Regulation 12(2)(b) of the PIT Regulations, 2015, anything done or any action taken or purported to have been done or taken includin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... publication of the information. No such evidence has been adduced in the SCN. The SCN simply assumes that the termination of SHAs involved a significant change in policies, plans or operations of the company and would per se render the information price sensitive. SEBI does not set out how the information in question had a material bearing on the price of the shares of GIPL, when such re-alignments for an infrastructure company are in ordinary course of business. [Gujarat NRE Mineral Resources Limited vs. SEBI (Order dated November 18, 2011); Anil Harish vs. SEBI (Order dated June 22, 2012)] iv. In the instant case, the termination of the SHAs had two consequences: (i) it resulted in GIPL acquiring exclusive control of the larger project worth ₹1648 Crores and (ii) GIPL exited Simplex s project of ₹940 Crores in which GIPL had invested only ₹4.9 Crores i.e. just 0.5% of the value of Simplex s project. This sum of ₹4.9 Crores represented less than 0.05% of GIPL s order book value as at the end of August 2013 and only around 0.7% of its turnover for the year ending March 31, 2013. GIPL s exclusive control over its own project meant that the benefits fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Gorkha Security Services vs. Govt. of NCT of Delhi Ors and the Hon ble SAT in Royal Twinkle Star Club Private Ltd. vs. SEBI (decision of February 3, 2016) that a show cause notice ought to clearly specify the nature of the direction proposed to be taken against a noticee and that failure to do so would be a violation of the principles of natural justice. 5.1.3 CICPL s replies to the allegations contained in the SCN Vide letter dated May 24, 2016 and also through oral submissions made during the hearing held on May 27, 2016, CICPL made the following submissions i. At the threshold, a foundational element for a charge of insider trading to be levelled is that there has to be UPSI i.e. information that can be said to have a material impact on the price of the securities, if published. That foundational element, as is evident from the SCN itself, is absent. As borne out by the price movement of the scrip on September 3, 2013, when the purported UPSI was published there was in fact a negligible increase in the price by 10 paise followed by a decline of 0.30 paise, which can by no stretch be considered material. CICPL adopts the arguments made by Mr. Rajan in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.1.7 As observed from the SCN, the announcement relating to termination of SHAs and the resultant price/volume impact is provided as under Date and Time of Announcement Corporate Announcement Price Impact/Shares Traded Remarks 3.09.2013 GIPL intimated NSE BSE of the termination of SHAs entered into between GIPL and Simplex. 3.09.2013 O H L C NSE (₹) 6.7 6.9 6.6 6.8 BSE (₹) 6.65 6.85 6.55 6.78 NSE Volume 40572 B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d significant changes in policies, plans or operations of the company. 5.1.9 As per the definition of price sensitive information under the PIT Regulations, 1992, the key element of the information is its likely impact and not the actual movement of the price of the scrip. In this context, we may also refer to the observations of Hon ble SAT in the matter of Rajiv B. Gandhi Others vs. SEBI (Order dated May 9, 2008), Unpublished price sensitive information has been defined in the regulations to mean any information which relates to any of the matters referred to in sub clauses (i) to (viii) of regulation 2(k) and is not generally known or published by the company for general information but which, if published or known, is likely to materially affect the price of the securities of the company in the market. In other words, any information which is not known but, if known, could either way affect the price of the scrip of the company would be unpublished price sensitive information. 5.1.10 Shri Abhijit Rajan has contended that GIPL had invested only ₹4.9 Crores i.e. just 0.5% of the value of Simplex s project. This sum of ₹4.9 Crores represent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed impact on account of termination of the SHAs, it is important to look at the net difference between the investment in GIPL and Simplex Projects. The net difference in the GIPL and Simplex Project is approximately ₹354 Crores i.e. (₹1648 Crores 2) (after accounting for equity interest held by GIPL (51%) and Simplex (49%) in the GIPL Project at 50%, respectively) (₹940 Crores 2) (after accounting for equity interest held by GIPL (49%) and Simplex (51%) in the Simplex Project at 50%, respectively). The aforesaid amount of ₹354 Crores when viewed in light of GIPL s order book value (total estimated road portfolio) as at the end of March 31, 2013 i.e. ₹11400 Crores (Source GIPL s Annual Report for the year ending March 31, 2013), showed a change of 3.1% in the said order book value. 5.1.13 As can be seen from the abovementioned scenarios, the impact on the order book value (total estimated road portfolio) of GIPL on account of termination of SHAs ranged from 3.1% to 4.1% depending upon the manner in which one would look at the picture. And whichever, one looks at the picture, the impact of the termination of the Agreements cannot be considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urities of company. 6.1.3 In view of the preceding paragraphs, I find that Shri Abhijit Rajan is indeed covered under the definition of insider in terms of Regulation 2(e)(i) of Insider Regulations, 1992. 7.1 Whether the trades executed by Shri Abhijit Rajan in the scrip of GIPL during the Investigation Period were done while in possession of UPSI i.e. the termination of SHAs entered into between GIPL and Simplex? By doing so, whether Shri Abhijit Rajan avoided any potential loss? 7.1.1 Allegations contained in the SCN As per the SCN, it has been alleged that Shri Abhijit Rajan had sold approximately 144 Lakh shares of GIPL (1.95% of the total shareholding) on a single day i.e. August 22, 2013, which was during the UPSI period. Shri Abhijit Rajan did not sell any shares before or after the UPSI period. By virtue of being the CMD of GIPL, Shri Abhijit Rajan was aware of the information pertaining to termination of SHAs entered into between GIPL and Simplex, which was a price sensitive information. Further, he had also participated in the Board Meeting held on August 9, 2013, wherein the termination of SHAs was discussed and approved. Therefore, it was alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by possession of UPSI; iii. The termination of the SHAs was not in the nature of price sensitive information and this too, if at all, for reasons explained below, was not adverse news at all, and so, I made no unlawful gain. iv. I did not communicate UPSI to third parties. v. No regulatory intervention under Sections 11 and 11B is warranted; and vi. The SCN is flawed as it does not clearly specify the action it proposes to take. vi. The SCN alleges that the proceeds of the Sale Transaction were transferred to GIL as late as on September 17, 2013, which is erroneous and reflects complete non application of mind. The proceeds of the Sale Transaction were transferred on August 31, 2013, and this is also borne out by my bank statements. The funds infused on September 17, 2013, are not at all connected with the Sale Transaction. On this ground alone, the charges in the SCN are not sustainable. vii. There was a compelling urgency to undertake the Sale Transaction as the MRA between GIL and its creditors was originally scheduled to be executed on August 22, 2013. It is not in dispute that the proceeds of the sale in their entirety were tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce sensitive information in his possession. xii. In any case, that the proof of the pudding is in the eating was demonstrated when the information about terminating the relationship with Simplex was actually announced. When actually published at 13:05 hours on September 3, 2013, the price of GIPL shares in fact closed higher and that too by a mere 10 paise demonstrating the accuracy of the assertion that the information was not material. xiii. In Para 14 of the SCN where SEBI has computed the alleged averting of losses by Rajan, SEBI has deliberately and wrongly taken the closing price of the next day viz. September 4, 2013 (instead of the closing price on September 3, 2013) since that was around 30 paise lower than the closing price on September 3, 2013. By simply adding one extra day, SEBI has been able to choose a price of ₹6.5 per share instead of ₹6.8 per share and that too to enable the computation of a wider difference from the ₹7.14 per share at which Rajan had sold his shares in a compliant manner. By this simple shifting by one day (one wonders why not by two days or three days all of which would be irrelevant in any case since the market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red into between GIPL and Simplex, the price movement in the scrip of GIPL showed a small increase of ₹0.10 paise (refer to table at paragraph 5.1.8 at page 19). On September 4, 2013, a decrease of ₹0.30 paise (refer to table at paragraph 5.1.8 at page 19) is observed in the price movement in the scrip of GIPL. 7.1.5 The loss avoided by Shri Abhijit Rajan as stated in the SCN, is detailed below NAME NO OF SHARES SOLD (X) WT. AVERAGE PRICE ( ₹) TOTAL SALE VALUE ( ₹) (A) WT. AVG. CLOSING PRICE ON 4.09.2013 ( ₹ ) (Y) APPROX. SALE VALUE AS ON 4.09.2013 ( ₹ ) (B)=(Y)*(X) LOSS AVOIDED ( ₹) (A)-(B) Abhijit Rajan 14381246 7.14 102740533.50 6.56 94407599 8332934.50 7.1.6 The trades by Shri Abhijit Rajan in the scrip of GIPL were executed on August 22, 2013 i.e. during the period w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.00 Abhijit Rajan 02.08.2013 5.00 Abhijit Rajan 10.08.2013 7.00 Abhijit Rajan 14.08.2013 0.50 Abhijit Rajan 31.08.2013 10.00 Abhijit Rajan 17.09.2013 8.00 TOTAL 46.50 7.1.10 From the above, it is observed that the total amount of funds infused by Shri Abhijit Rajan in GIL was ₹40.50 Crores (₹6 Crores was infused by Pacific Energy Pvt. Ltd., another Promoter entity of GIL). It is pertinent to note that the aforementioned funds were infused by him in a relatively short period of three months i.e. from June 24, 2013 September 17, 2013. More specifically, the bank account statement of Shri Abhijit Rajan (Account no. 20000835962 with Allahabad Bank), shows that there was a transfer of ₹10 Crores on August 31, 2013, from Shri Abhijit Rajan to GIL. The aforesaid transfer o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction in the scrip of GIPL. Having said this, however, the trades executed by him in the scrip of GIPL do appear to have been executed for meeting the requirement of Promoter s contribution as per the CDR Scheme for GIL. Further, the proceeds of trades from the said transactions also appear to have been transferred to GIL as borne out from the bank statements submitted by him. The fact that Shri Abhijit Rajan also sold some of his properties (as detailed at paragraphs 7.1.11 7.1.12) does lend credence to his contention that the sale transaction was only to infuse funds in GIL, which was necessitated on account of the CDR Scheme. Even accepting that the transactions entered into by Shri Abhijit Rajan in the scrip of GIPL were the result of a legitimate requirement to infuse funds in GIL, the fact however, remains that such transactions were in breach of law, however necessary and bonafide his requirement was. 8.1 Whether CICPL is a connected person to GIPL (through Shri Abhijit Rajan) in terms of Regulation 2(c)(ii) of the PIT Regulations, 1992? Whether Shri Abhijit Rajan communicated the price sensitive information regarding termination of SHAs entered into between GIPL and S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to such company. The SCN does not set out how CICPL is at all connected to GIPL and there is no admission by CICPL that it is connected with me, as wrongly alleged. 8.1.3 CICPL s replies to the allegations contained in the SCN Vide their reply to the SCN and also through oral submissions made during the hearing, CICPL made the following submissions i. The Noticees are not connected persons to GIPL and did not have access to UPSI, as wrongly alleged. ii. The Sale Transaction i.e. sale of 28,56,618 shares of GIPL by CICPL on August 6, 2013 for an aggregate consideration of ₹2.14 Crores, was undertaken for clearing a margin shortfall owed to a RBI registered Non Banking Finance Company. iii. The Sale Transaction took place prior to the alleged UPSI actually coming into existence. iv. CICPL did not procure any UPSI from Abhijit Rajan; v. The Sale Transaction did not result in CICPL making any unlawful gains or wrongfully avoiding any losses; and vi. CICPL s actions in clearing a margin shortfall in fact is in the interests of the securities market. vii. It has been wrongly stated in the SCN that CICPL by its o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled upon CICPL to clear the shortfall amount by a deposit of funds equivalent to this amount by August 7, 2013. xv. The Sale Transaction was undertaken to raise funds to meet a margin shortfall that CICPL was supposed to clear by August 7, 2013. xvi. CICPL s decision to sell shares of GIPL was driven by commercial considerations and like any investor in the stock market, it was based on publicly available information that outlook for companies in the infrastructure sector was negative. In fact, research analysts at the relevant time had indicated that these companies are likely to default on their bank debt obligations and lenders might approve forced debt restructuring packages. A reference is made to the publicly available research report of Fitch Group s Indian arm India Ratings Research dated February 1, 2013. In fact, GIL had posted a huge loss for the first time for the financial year end March 31, 2013 of approximately ₹445 Crores and had huge debts owed to banks. CICPL, as a company who has been trading in the securities market for over 8 years, was aware that GIL was in the process of a debt restructuring scheme. The market was well aware that GIL had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nature of Property Value ( ₹ in Crores) Date of Payment Date of Agreement Date of Registration of Sale Agricultural Land Village Kale, District Pune 0.90 28.08.2013 28.08.2013 Not Yet Registered Agricultural Land Village Kolgaon, District Raigad 1.10 28.08.2013 28.08.2013 20.12.2013 Agricultural Land Village Kolgaon, District Raigad 2.40 28.08.2013 28.08.2013 20.12.2013 Flat at Four Bungalows, Andheri, Mumbai 0.75 28.08.2013 28.08.2013 19.09.2013 Total 5.15 iii. The loss avoided by CICPL is detailed below NAME NO O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for any possible fall in the value of the securities that were pledged. IIFL Finance vide its letter dated July 30, 2013, informed CICPL that there was a margin shortfall of ₹2.55 Crores and called upon CICPL to clear the shortfall amount by a deposit of funds equivalent to this amount by August 7, 2013. The Sale Transaction was undertaken to raise funds to meet a margin shortfall that CICPL was supposed to clear by August 7, 2013. Further, during the personal hearing before me, CICPL was asked to explain as to why it chose to sell only the shares of GIPL and not any of the other securities pledged with IIFL Finance. Vide their written submissions, CICPL inter alia stated that the value of shares of GIPL pledged with IIFL Finance was closest in value to the margin shortfall that CICPL was required to fund. Further, CICPL has further stated that the shares of GIPL were acquired by CICPL in the IPO at a price of around ₹167 per share (in 2008) and had subsequently dropped to around ₹6 per share around the time of the sale transaction and therefore, a sale of GIPL shares was the obvious choice to generate proceeds that were commensurate to the margin shortfall. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Sale Deeds were registered within that time period. Sale Deed that has not yet been registered is for land, a part of which is a private forest under the Maharashtra Private Forest Act, 1975, for which necessary permissions were required, in order for the sale deed to be registered. In this regard, a reference may be made to Clause (iii) of the Agreement to sell dated August 28, 2013, which provides that the Vendor has informed the Purchaser that the 7/12 extract has the remark of Private Forest which is under the Maharashtra Private Forests Act of 1975 and the Vendor shall assist the Purchaser in making application(s) and necessary permissions. As the requisite permissions have not been obtained, the sale deed is yet to be registered. The SCN states that neither Shri Abhijit Rajan nor CICPL showed any kind of urgency to register the sale of properties and further, one of the properties sold was yet to be registered even after two years of entering into the Agreement for Sale. I find that the Sale Deed for 3 of the 4 properties were registered within a period of four months from the date of execution of Agreement for sale and in respect of the property where sale has not yet b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013. By simply adding one extra day, SEBI has been able to choose a price of ₹6.5 per share instead of ₹6.8 per share and that too to enable the computation of a wider difference from the ₹7.14 per share at which Rajan had sold his shares in a compliant manner. By this simple shifting by one day, SEBI has attempted to compute a greater size of loss being allegedly averted. 9.2 The loss avoided by Shri Abhijit Rajan as stated in the SCN, is detailed below NAME NO OF SHARES SOLD (X) WT. AVERAGE PRICE ( ₹) TOTAL SALE VALUE ( ₹) (A) WT. AVG. CLOSING PRICE ON 4.09.2013 ( ₹ ) (Y) APPROX. SALE VALUE AS ON 4.09.2013 ( ₹ ) (B)=(Y)*(X) LOSS AVOIDED ( ₹) (A)-(B) Abhijit Rajan 14381246 7.14 102740533.50 6.56 94407599 8332934.50 9.3 I note that the price sensitive information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abad Bank. Similarly, CICPL had deposited an amount of ₹35.24 Lakhs in an account SEBI Escrow A/c Consolidated Infrastructure Co. Pvt. Ltd. (A/c No. 50330378961) with Allahabad Bank. 10.3 Having regard to the above discussion, I, in exercise of the powers conferred upon me in terms of Section 19 of the SEBI Act read with Sections 11 and 11B of the SEBI Act read with PIT Regulations, 1992 and PIT Regulations, 2015, hereby direct as follows i. The SCN dated March 29, 2016, issued against Shri Abhijit Rajan, is disposed of without any further directions. On and from the date of operation of this Order, the directions issued vide the Interim Order dated July 17, 2014 read with the Confirmatory Order dated March 23, 2015, will not continue further against Shri Abhijit Rajan. ii. In view of the findings against Shri Abhijit Rajan in the instant proceedings in respect of the violations alleged in the SCN, he becomes liable for disgorging the amount of unlawful gains. Accordingly, Allahabad Bank, wherein the amount of ₹1.09 Crores was deposited by Shri Abhijit Rajan in an account SEBI Escrow A/c Abhijit Rajan (A/c No. 50330382173) , shall transfer the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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