The Supreme Court has upheld the acquittal of Gammon India promoter Abhijit Rajan on insider trading charges after market regulator Securities and Exchange Board of India (Sebi) had moved the top court challenging Rajan’s acquittal in 2019 by the Securities Appellate Tribunal (SAT).
In its order, the SC dismissed Sebi’s appeal on the grounds that the information based on which Rajan traded shares of Gammon India (GIPL) resulted in a gain in share price when stock exchanges were intimated about it and that his act of selling shares in advance did not meet the criteria of “profit motive” essential to establish an insider trading charge; and that the proceeds from the share sale were used to meet funding requirements for restructuring the company’s debt.
In its plea, Sebi had argued that Gammon had terminated a shareholders agreement with Simplex Infrastructure by way of which the two companies would have taken 49 per cent stakes in each other’s highway projects.
“…we are of the view on Question No.1 that the information regarding the termination of the two contracts can be characterised as price sensitive information, in that it was likely to place the existing shareholders in an advantageous position, once the information came into the public domain. In such circumstances, our answer to Question No.2 would be that the sale by the respondent, of the shares held by him in GIPL would not fall within the mischief of insider trading, as it was somewhat similar to a distress sale, made before the information could have a positive impact on the price of the shares… Our answers to Question Nos. 1 and 2 are sufficient to hold that the impugned order of the Tribunal does not call for any interference. Therefore, the appeal is dismissed,” a two-judge SC bench of Justice Indira Banerjee and Justice V Ramasubramanian noted.
