Insider-trading charge: Vellayan resigns as Murugappa Chairman

Our Bureau Chennai | Updated on January 23, 2018 Published on May 23, 2015

A Vellayan

Denies SEBI’s accusations

A Vellayan has ‘stepped aside’ from the chairmanship of the Murugappa Group Corporate Board till a SEBI order linking him to insider trading is resolved.

A note from his office said the SEBI order linking him to two individuals who had traded in the stocks of Sabero Organics Gujarat Ltd, which was acquired by Coromandel International in May 2011, was “based merely on suspicion and is a far fetched tenuous conjecture.”

However, the note said that “in keeping with family values and tradition”, he has stepped aside from the chairmanship of the Murugappa Group Corporate Board, and of Coromandel International and EID Parry. It added that SEBI has tried to use an unconnected property deal with AR Murugappan, son of a grand aunt, to link Vellayan with the share deal. SEBI has “jumped to the conclusion” that the Sabero share trades could be attributed to “suspected communication” of unpublished price sensitive information by Vellayan to Murugappan.

This is not a conclusive finding by SEBI and Vellayan is resolute in “defending the serious harm to reputation by this order” and will take legal action, the note said. He will also extend full cooperation to SEBI to complete investigations quickly and demonstrate his bona fide. On Thursday, SEBI ‘impounded’ a total of ₹2.05 crore as the alleged gain, including interest,from the accounts of Vellayan, Murugappan and two others — V Karuppiah (HUF) and C Gopalakrishnan. The regulator gave them 21 days to file a reply.

According to SEBI, after a probe between May 15, 2011 and June 15, 2011, the trading pattern in Sabero scrips by Gopalakrishnan and Karuppiah became suspect.

SEBI said that on May 15, 2011, representatives of Coromandel (including Vellayan) and Sabero met to negotiate the acquisition.

An analysis by SEBI of the trading pattern in the Sabero scrip and the bank statements of the entities revealed that all the entities were connected. SEBI found that on May 28, 2011, Gopalakrishnan had received ₹1 crore from Subramaniam, son of AR Murugappan, both holding accounts in the same bank branch. Gopalakrishnan used the money to pay the trading member on the same day. Subramaniam, in turn, had received the money from his father Murugappan who, on the same day, prematurely closed a fixed deposit. Gopalakrishnan paid ₹1.02 crore to Subramaniam 24 days after receiving the money.

SEBI says an analysis of Murugappan’s bank statement revealed certain transactions with Vellayan. Murugappan, in a letter dated December 20, 2013, submitted that a payment of ₹1 crore to Vellayan was an advance for a property but the deal did not happen and the money was returned.

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Published on May 23, 2015
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