RAKESH AGRAWAL Vs. SECURITIES EXCHANGE BOARD OF INDIA
SECURITIES APPELLATE TRIBUNAL
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(1.) ORDER passed by the Securities and Exchange Board of India, the Respondent herein (SEBI) on 10.6.2001, under sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 (the SEBI Act) read with regulation 11 of the Securities and Exchange Board of India (Insider Trading) Regulations, 1992 (the SEBI Regulations) against Shri Rakaesh Agrawal, the Appellant herein, is under challenge in the present appeal. By the said order SEBI had directed that:
"Shri Rakesh Agrawal deposit Rs.34,00,000 with Investor Protection Funds of Stock Exchange , Mumbai and NSE (in equal proportion i.e. Rs.17,00,000 in each exchange) to compensate any investor which may make any claim subsequently. Any investor who is aggrieved with sale of shares of ABS Industries to Mr. I.P. Kedia during September 9, to October 1, 1996 can approach SEBI within 15 days of this order."
(2.) By the same order SEBI directed to (i) initiate prosecution under section 24 of the SEBI Act and (ii) adjudication proceedings under section 15I read with section 15 G of the SEBI Act against the Appellant.
The Appellant is the Managing Director of ABS Industries Ltd., Vadodara (ABS) a company incorporated under the Companies Act 1956 (name of the company has been subsequently changed to Bayer ABS Ltd.). The main business of ABS is manufacture of ABS resins (Acrylonitrile Butadiene Styrene) and SAN, (Styrene Acrylonitrile resins). Shares of ABS are listed on Bombay Stock Exchange National Stock Exchange, Ahmedabad Stock Exchange and Vadodara Stock Exchange. Bayer AG (Bayer) is a company registered in Germany having many subsidiaries in various parts of the world. Bayer took controlling stake in ABS in October 1996 by acquiring
(a) 55,80,000 shares in the allotment made on a preferential basis by ABS (@ Rs.70/-)
(b) 20% shares from the existing shareholders @ Rs.80/- per share in a public offer.
(3.) IT has been stated by SEBI that there were allegations of purchases being made prior to announcement of Bayer acquiring controlling stake in ABS, on the basis of inside information. In that context investigations were undertaken by SEBI to ascertain the truth or otherwise of those allegations. SEBI's investigation is stated to have revealed that one Mr. I. P. Kedia, brother in law of the Appellant had purchased shares preceding Bayer's acquisition of ABS and that the said acquisition was made at the behest of the Appellant and the Appellant funded the acquisition. The investigation is also stated to have revealed that the shares were acquired on the basis of the unpublished price sensitive information relating to impending takeover of ABS by Bayer, available to the Appellant by virtue of his position as the Managing Director of ABS and also as the negotiator from the side of ABS, in the negotiations with Bayer.;
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