The Securities Appellate Tribunal has upheld SEBI’s order imposing penalty on V.K. Kaul and his wife Bala Kaul Rs 60 lakh for insider trading in the Orchid Chemicals scrip.
SEBI had imposed a fine of Rs 50 lakh on V.K. Kaul and Rs 10 lakh on Bala Kaul.
SEBI’s investigation report found that Bala Kaul bought 35,000 shares of Orchid Chemicals at an average price of Rs 131.71 a share on March 27 and 28, 2008, and sold them at an average price of Rs 219.94 a share on April 10, 2008.
The report alleged that Kaul had bought the shares on his wife's behalf. Thus, Kaul was deemed to be a connected person to Ranbaxy and had traded the Orchid scrip based on UPSI (unpublished price sensitive information), which was a clear violation of the prohibition of insider-trading regulations.
SAT was of the view that V.K. Kaul was an insider, being a whole-time independent director on December 31, 2003, and an independent director of Ranbaxy in 2008. Kaul was also a member of the audit and compensation committees of Ranbaxy and had attended all the meetings of these two committees which took place in the year 2008, observed SAT.
SAT said that SEBI had placed enough evidence (telephone records) to show that Kaul was in constant touch with the top management (Malvinder Mohan Singh and Umesh Sethi) between March 24, 2008, and March 26, 2008. Hence a reasonable presumption could be drawn that V.K. Kaul, being a person connected to Ranbaxy was aware about the decision to open demat account, authorisation to Malvinder Mohan Singh to sanction loan and decision of Solrex to invest in the scrip of the target company, said SAT.