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TMI Blog2016 (7) TMI 1660X X X X Extracts X X X X X X X X Extracts X X X X ..... une 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 % No. of Shareholders No. of Shares % Promoter 2 550400000 74.98 2 550400000 74.98 2 550400000 74.98 Non-Promoter 38364 183626438 25.02 37996 183626438 25.02 37625 183626438 25.02 Total 38366 734026438 100 37998 734026438 100 37627 734026438 100 iii. At the relevant time, GIPL was promoted by Gammon India Limited ("GIL") [71.93%] and Gactel Turnkey Projects Limited (subsidiary of GIL) [3.05%]. iv. Shri Abhijit Rajan was the Chairman and Managing Director ("CMD") of GIPL till September 20, 2013, when he resigned from the post of CMD. However, Shri Abhijit Rajan continued to be on the Board of GIPL even after the said resignation. v. In the year 2012, - * GIPL was awarded a road project by National Highways Authority of India ("NHAI") in Andhra Pradesh ("GIPL Project"). The total cost of the GIPL Project as per NHAI Concession Agreement was Rs.1648 Crores. GIPL set up a special purpose vehicle ("S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken. Further, vide the e-mail dated June 21, 2014, GIPL forwarded extracts of minutes of the Board Meeting of August 9, 2013, confirming that Shri Abhijit Rajan attended and chaired the said meeting. xiii. It was prima facie concluded that - * The UPSI i.e. termination of the SHAs dated April 26, 2012, entered into between GIPL and Simplex, came into existence during the second week of July 2013 and remained unpublished till September 3, 2013 i.e. date on which the said information was disclosed by GIPL to NSE & BSE. * As the CMD of GIPL, Shri Abhijit Rajan was reasonably expected to have had access to the UPSI from the second week of July 2013. In any case, Shri Abhijit Rajan came in possession of the UPSI at least on August 9, 2013, when the Board of Directors of GIPL approved termination of SHAs. * The sale of shares in GIPL, by Shri Abhijit Rajan on August 22, 2013, was on the basis of UPSI i.e. termination of the SHAs dated April 26, 2012, entered into between GIPL and Simplex, which was later published on September 3, 2013. xiv. Shri Abhijit Rajan therefore, engaged in insider trading which is prohibited under the SEBI Act, 1992 ("SEBI Act") and the SEBI (Prohi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the Hon'ble Securities Appellate Tribunal ("SAT") in Appeal no. 326 of 2015. The Hon'ble SAT disposed of the aforesaid Appeal vide an Order dated February 4, 2016, with the following directions - "2. Counsel for SEBI, on instruction, states that investigation in the present case is complete and the SEBI would issue a show-cause notice to the Appellant within a period of two months from today and pass final order thereon within a period of two months from the date of the Appellant filing a reply to the show-cause notice. The statements made by the Counsel for SEBI is accepted. 3. ... Counsel for the Appellant seeks to withdraw the appeal ... 4. Accordingly, appeal is allowed to be withdrawn ..." SEBI's Order dated March 21, 2016 - 1.6 Subsequent to completion of Investigation, the following directions were issued vide SEBI's Order dated March 21, 2016, against Shri Abhijit Rajan; Consolidated Infrastructure Company Private Limited ("CICPL") and its Directors i.e. Shri Kiran Indru Hingorani and Shri Indru B. Hingorani - "10. The investigation has also observed that by indulging in 'insider trading' and sold shares while in possession of UPSI, Mr. Abhijit Rajan and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eposited an amount of approximately Rs.1.09 Crores in an account 'SEBI Escrow A/c Abhijit Rajan (A/c No. 50330382173)' with Allahabad Bank. Similarly, vide letter dated April 15, 2016, CICPL informed SEBI that it had deposited an amount of approximately Rs.35.24 Lakhs in an account 'SEBI Escrow A/c Consolidated Infrastructure Co. Pvt. Ltd. (A/c No. 50330378961)' with Allahabad Bank. Show Cause Notice dated March 29, 2016 - 2.1 During the intervening period, SEBI issued a Show Cause Notice ("SCN") dated March 29, 2016, to Shri Abhijit Rajan; CICPL and its Directors i.e. Shri Kiran Indru Hingorani and Shri Indru B. Hingorani, calling upon the said entities to show cause as to why suitable directions under Sections 11(4) and 11B of the SEBI Act including disgorgement of gains, should not be passed against them for the alleged violations of the PIT Regulations, 1992 read with the Insider Trading Regulations, 2015 ("PIT Regulations, 2015"). 2.2 The SCN inter alia stated - i. SEBI initiated investigations with regard to suspected insider trading in the scrip of GIPL. The period of investigation was from July 1, 2013 to September 30, 2013 ("Investigation Period"). ii. As per the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second week of July, 2013, wherein through telephonic discussions, the termination of the tie-up between Simplex and GIPL, was discussed. However, since no exact date was provided by GIPL, UPSI was taken to have existed since the first day of the second week of July, 2013 i.e. July 8, 2013. PSI PUBLICATION DATE September 3, 2013 iv. The trading details of Shri Abhijit Rajan and CICPL before and during the Investigation Period, are given below - Before UPSI Period (July 1, 2013 to July 7, 2013) Client Name Buy Quantity Sell Quantity Sell Date Net Abhijit Rajan 0 0 NA 0 CICPL 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 Abhijit Rajan 0 0 NA 0 CICPL 0 0 NA 0 Total 0 0 NA 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ijit Rajan around August, 2013. CICPL had acquired several properties from Shri Abhijit Rajan for an aggregate consideration of approximately Rs.5.15 Crores on August 28, 2013. However, neither Shri Abhijit Rajan nor CICPL showed any kind of urgency to register the sale of those properties. The demat statements of CICPL notes that the shares of GIPL in CDSL were pledged with India Infoline Finance Ltd. in 2011 and again in 2012 and CICPL decided to un-pledge and sell shares of GIPL. In view of the trading pattern of CICPL and its own admission that it was connected to Shri Abhijit Rajan, and in view of its business relationship with Shri Abhijit Rajan as evidenced from the aforementioned property transactions, in terms of Regulation 2(c)(ii) of PIT Regulations, 1992, CICPL is a 'connected person' to GIPL and may reasonably be expected to have an access to unpublished price sensitive information in relation to GIPL. Shri Abhijit Rajan had communicated the UPSI pertaining to termination of agreement entered into between GIPL with Simplex and CICPL had traded in the scrip while in possession of UPSI. In view of the same, CICPL is an 'insider' to the information pertaining to terminati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 CDR Scheme. 3.3.2 Shri Abhijit Rajan submitted the abovementioned information alongwith written submissions vide letter dated May 16, 2016. 3.4.1 For the hearing held on May 27, 2016, CICPL and its Directors appeared before me through their Advocates. During the aforementioned hearing, CICPL and its Directors were directed to submit the following information, viz. - i. How in a short period (i.e. less than a month's time) CICPL was able to conclude all the real estate transaction of agricultural properties with Shri Abhijit Rajan, CMD of GIPL? ii. What were the reasons for (a) not registering one property even after payment of full consideration and (b) delay of four months for registration of two other properties? iii. Why CICPL chose to sell the shares of GIPL from the group of securities pledged with India Infoline Finance Limited ("IIFL Finance")? iv. The prices at which all the shares pledged with IIFL were acquired? v. Balance Sheet and Cash Flow Statement of CICPL for the last three years i.e. March 31, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Simplex? By doing so, whether Shri Abhijit Rajan avoided any potential loss? iv. 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 Simplex, CICPL? Whether the trades executed by CICPL in the scrip of GIPL during the Investigation Period were done while in possession of UPSI? By doing so, whether CICPL avoided any potential loss? 4.3 Before I proceed to deal with the charges contained in the SCN, the relevant legal provisions, the contravention of which have been alleged in the instant proceedings, are reproduced below - PIT Regulations, 1992 Regulation 2(c)(ii) (c) "Connected person" means any person who - ... (ii) occupies the position as an officer or an employee of the company or holds a position involving a professional or business relationship between himself and the company whether temporary or permanent and who may reasonably be expected to have an access to unpublished price sensitive information in relation to that company: Explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion commenced or show cause notice issued under the repealed provisions of PIT Regulations, 1992, prior to such repeal, shall be deemed to have been done or taken under the corresponding provisions of PIT Regulations, 2015 (i.e. Regulation 12 of the PIT Regulations, 2015). 5.1 Whether the information regarding the termination of SHAs entered into between GIPL and Simplex, was a price sensitive information? 5.1.1 Allegations contained in the SCN - As per the SCN, it has been alleged that the Corporate Announcement dated September 3, 2013, pertaining to termination of tie-up entered into between GIPL and Simplex was a price sensitive information. 5.1.2 Shri Abhijit Rajan'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 16, 2016, Shri Abhijit Rajan made the following submissions - i. "The SCN does not crystallize the exact date on which the so called UPSI came into existence. It blithely assumes that the UPSI came into existence in the first day of the second week of July 2013 when officials of GIPL and Simplex had preliminary discussions on termination of the SHAs. That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as material exposures by any reasonable man. Therefore, the termination of the SHAs cannot be regarded as information adverse to GIPL, much less, even material to GIPL. v. GIPL itself did not regard the information as being price sensitive and therefore, did not close the trading window. The SCN selectively relies on a letter from GIPL dated September 18, 2014 and refers to the termination of the SHAs as a major corporate development to support its allegation that the termination of the SHAs was UPSI. In fact, GIPL in response to SEBI's query on date of closure of the trading window under GIPL's Insider Code, replied that "The Company did not close the trading window for the corporate announcement on September 3, 2013, as it was not price sensitive information as per our Insider Trading Code. vi. The Compliance Office of GIPL, who is entrusted with the responsibility of implementing GIPL's Insider Code, had vide an email dated July 22, 2013, convening the Board Meeting on August 9, 2013, clearly specified that the prohibition on trading in securities will commence on August 4, 2013 and end on August 10, 2013 (both days inclusive). ... It is therefore, clear that GIPL did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year 2012, by NHAI, for a total cost of Rs.1648 Crores. Similarly, in that same year, Simplex was awarded a road project by NHAI in Jharkhand and West Bengal for a total cost of Rs.940 Crores. On April 26, 2012, GIPL entered into two Shareholders Agreements ("SHA") with Simplex pursuant to which - * GIPL would invest in MDEPL for the Simplex Project; * Simplex would invest in VGRPPL for the GIPL Project; * As a result of the aforementioned, GIPL and Simplex would hold 49% equity interest in the other's project. 5.1.5 On August 9, 2013, the Board of Directors of GIPL passed a resolution authorizing the termination of the SHAs entered into between GIPL and Simplex. On September 3, 2013, GIPL made a disclosure to NSE & BSE, regarding the termination of the aforementioned SHAs (dated April 26, 2012), with Simplex. 5.1.6 As per the details submitted by GIPL vide letter dated September 18, 2014 and e-mail dated August 4, 2015, the chronology of events related to the corporate announcement "Termination of SHAs with Simplex" is provided as under - DATE EVENT Second Week of July 2013 Telephonic discussion. Termination of the tie-up between Simplex and GIPL. July ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information which relates directly or indirectly to a company and which if published is likely to materially affect the price of securities of company. Explanation - The following shall be deemed to be price sensitive information - i. periodical financial results of the company; ii. intended declaration of dividends (both interim and final); iii. issue of securities 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; vii. and 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 regulati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved. 5.1.12 In the context of aforementioned submission, the following two scenarios on account of termination of SHAs would be possible - i. The cancellation of GIPL's association with the Simplex Project (through termination of SHAs) resulted in a net change of approximately 4.1% on the said order book value [after accounting for equity interest held by GIPL (49%) and Simplex (51%) in the Simplex Project at 50%, respectively i.e. (Rs.940 Crores / 2) / Rs.11400 Crores x 100]. ii. In order to examine the combined 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 Rs.354 Crores i.e. (Rs.1648 Crores / 2) (after accounting for equity interest held by GIPL (51%) and Simplex (49%) in the GIPL Project at 50%, respectively) - (Rs.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 Rs.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. Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Abhijit Rajan was privy to the aforesaid UPSI regarding termination of the SHAs entered into between GIPL and Simplex. This fact has also not been disputed by Shri Abhijit Rajan. 6.1.2 As per Regulation 2(e)(i) of the Insider Regulations, 1992, 'insider' means "any person who, is or was connected with the company or is deemed to have been connected with the company and is reasonably expected to have access to unpublished price sensitive information in respect of securities 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Restructuring Agreement (MRA) and (ii) Rs.50 Crores on or before 120 days from the date of the Letter of Approval from the lenders. v. In this backdrop, I respectfully submit i. The Sale Transaction was motivated by a compelling and emergent need, and for a transaction, SEBI has itself acknowledged was beneficial to the investors and the securities market; ii. The Sale Transaction was not motivated 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 Septemb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, deny that I have unlawfully avoided a loss of Rs.83.33 Lakhs or that such sum represents an 'illegitimate gain' made by me. xi. Rajan, in fact, sought pre-clearance for the Sale Transactions as it exceeded the Rs.5 Lakhs threshold under GIPL Code. The pre-clearance was sought and approved because the trading window was not shut and Rajan did not have any price 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no compelling urgency for Shri Abhijit Rajan to execute the said trades in the scrip of GIPL. iv. Shri Abhijit Rajan had executed trades in the scrip of GIPL while in possession and on the basis of UPSI. 7.1.4 It is noted that on September 3, 2013 i.e. immediately after disclosure of termination of SHAs entered into between GIPL and Simplex, the price movement in the scrip of GIPL showed a small increase of Rs.0.10 paise (refer to table at paragraph 5.1.8 at page 19). On September 4, 2013, a decrease of Rs.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 (Rs.) TOTAL SALE VALUE (Rs.) (A) WT. AVG. CLOSING PRICE ON 4.09.2013 (Rs.) (Y) APPROX. SALE VALUE AS ON 4.09.2013 (Rs.) (B)=(Y)*(X) LOSS AVOIDED (Rs.) (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 when the price sensitive information regarding termination of SHAs entered i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ores (Rs.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 Rs.10 Crores on August 31, 2013, from Shri Abhijit Rajan to GIL. The aforesaid transfer of funds on August 31, 2013, does appear to have been for meeting the requirement of bringing in the Promoter's contribution for implementation of the CDR Package in respect of GIL. In view of the aforesaid, the trades executed by Shri Abhijit Rajan in the scrip of GIPL, although done while in possession of and on the basis of the UPSI, also appear to have been necessitated on account of the requirement for infusion of funds towards implementation of the CDR Package of GIL. As a result of the said transactions, Shri Abhijit Rajan avoided loss amounting to approximately Rs.84 Lakhs. 7.1.11 The SCN states that CICPL had acquired several properties from Shri Abhijit Rajan for an aggregate consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Investigation Period were done while in possession of UPSI? By doing so, whether CICPL avoided any potential loss? 8.1.1 Allegations contained in the SCN - As per the SCN, it has been alleged that CICPL was admittedly connected to Shri Abhijit Rajan since CICPL was introduced to him sometime during August 2013 and also had business relationship with Shri Abhijit Rajan on account of several property transactions. Based on details such as date of Agreement for Sale and date of registration of the properties, neither Shri Abhijit Rajan nor CICPL had shown any kind of urgency to register the sale and further, one of the properties sold was yet to be registered even after two years of entering into the Agreement for Sale. In view of the aforesaid, CICPL was a connected person to GIPL (through Shri Abhijit Rajan) in terms of Regulation 2(c)(ii) of the PIT Regulations, 1992, and may reasonably be expected to have an access to the UPSI. It was therefore, alleged that CICPL was an 'insider' to the price sensitive information pertaining to termination of the SHAs entered into between GIPL and Simplex. As a result, it was alleged that CICPL sold shares of GIPL while in possession of UPSI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the abovementioned property transactions in terms of Regulation 2(c)(ii) of the PIT Regulations, 1992, CICPL is a connected person to GIPL and may reasonably be expected to have an access to unpublished price sensitive information in relation to GIPL." viii. In the present case, it is an undisputed position that the Sale Transaction was executed on August 6, 2013. CICPL entered into agreements to sell for acquiring certain immovable properties of Mr. Abhijit Rajan much later i.e. on August 28, 2013 and paid the purchase consideration on that date. ix. It is therefore, clear that the trades preceded the alleged 'business relationship' of CICPL with Mr. Abhijit Rajan, which is fatal to SEBI's case since the alleged connection, if at all, came into existence only after the trade in question. x. The SCN has completely overlooked this critical aspect. When a charge of insider trading is levelled against a 'connected person', it would have to be established by SEBI inter alia that the connection reasonably affords access to UPSI. Therefore, it would obviously follow that the 'connection' or access to UPSI must be shown to exist either at the time of the impugned trade or s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its subsidiary, GIPL. xvii. In the present case, the SCN does not even attempt to set out how CICIPL at all could have been aware of the termination of the SHA. The Sale Transaction therefore, cannot be held to have taken place in the period of UPSI. xviii. It would lead to absurd consequences if every person who has purchased property from someone would be treated as having received insider information in relation to all the companies in which the seller of the property has an interest. xix. ... The real estate transactions in question were finalized based on meetings in person and oral discussions between the Noticees and Mr. Rajan. Mr. Rajan informed the Noticees that he was in dire need of funds and was keen to receive full consideration upfront upon conclusion of the agreement to sell and in return offered the Noticees the properties at an attractive rate. Therefore, it was a good investment opportunity of CICPL. xx. Section 23 of the Registration Act, 1908, allows parties to register a sale deed within 4 months of execution. All the Sale Deeds were registered within that time period. xxi. It is submitted that the Sale Deed that has not yet been registered is for l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ths prior to an act of insider trading." 8.1.6 I note that the SCN makes a specific reference to Regulation 2(c)(ii) of the PIT Regulations, 1992, while alleging connection of CICPL and GIPL (through Shri Abhijit Rajan). However, in addition to the aforesaid provision, the SCN also alleges that Shri Abhijit Rajan communicated the UPSI to CICPL and as a result, violated Regulation 3(ii) of the PIT Regulations, 1992 read with Regulation 12(2) of the PIT Regulations, 2015 and Section 12A(e) of the SEBI Act. 8.1.7 I find that the trades in the instant proceedings i.e. sale of approximately 28.57 Lakh shares of GIPL for an aggregate consideration of approximately Rs.2.14 Crores, were executed by CICPL on August 6, 2013. Further, I find that CICPL entered into Agreements for acquiring immovable properties of Shri Abhijit Rajan on August 28, 2013 and also paid the purchase consideration on that date. 8.1.8 CICPL has submitted that it "had obtained loans from IIFL Finance, a Non-Banking Finance Company registered with the RBI. Under the terms of the Master Financing Agreement, CICPL had pledged shares of GIPL held by it as collateral and was to maintain a minimum margin to account fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Rs.2.14 Crores. The aforesaid trades when viewed in light the letter dated July 30, 2013 and also the schedule of listed securities pledged by CICPL with IIFL Finance, does appear to support the submission that the same were executed to clear the margin shortfall. 8.1.9 As contended by CICPL, "Section 23 of the Registration Act, 1908, allows parties to register a sale deed within 4 months of execution. All the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i and Shri Indru B. Hingorani. Quantification of unlawful gains or avoidance of loss by Shri Abhijit Rajan. 9.1 In his submissions, Shri Abhijit Rajan has contended "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 Rs.6.5 per share instead of Rs.6.8 per share and that too to enable the computation of a wider difference from the Rs.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 (Rs.) TOTAL SALE VALUE (Rs.) (A) WT. AVG. CLOSING PRICE ON 4.09.2013 (Rs.) (Y) APPROX. SALE VALUE AS ON 4.09.2013 (Rs.) (B)=(Y)*(X) LOSS AVOIDED (Rs.) (A)-(B) Abhijit Rajan 14381246 7.14 102740533.50 6.56 94407599 8332934.50 9.3 I note that the price sensitive information r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ICPL had deposited an amount of Rs.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 Rs.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 said amount within a period of 10 days to SE ..... X X X X Extracts X X X X X X X X Extracts X X X X
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