The Securities Appellate Tribunal (SAT) on Wednesday dropped SEBI’s insider-trading charge and penalty against Piramal Enterprises Ltd (PEL) and its promoters Ajay and Swati Piramal and their daughter Nandini Piramal. It found no misuse of unpublished price sensitive information (UPSI) by the promoters.

Converting SEBI’s monetary penalty into a mere warning in its order, SAT said: “SEBI is a watchdog, not a bulldog.”

Remedial measures

SAT relied on a 2018 Supreme Court verdict in the matter of Rakhi Trading, which had stated: “Fairness, integrity and transparency are the hallmark of the stock market in India. SEBI is the vigilant watchdog; whether the factual matrix justified the watchdog’s bite is the issue arising for consideration in this case.” SAT said this was precisely the question in the PEL case, too. “If there is an infraction of a rule, remedial measures should be taken in the first instance and not punitive measures. In the absence of any direct or clinching evidence of insider trading or misuse of UPSI, a reasonable benefit of doubt should be extended to PEL instead of mechanically imposing a penalty,” it added.

SEBI had initiated proceedings against the Piramals over their company’s $3.7-billion deal to sell its healthcare business to Abbott. The regulator concluded there was an insider-trading charge after PEL said Anand Piramal, Rajesh Laddha and Nitin Nohria were privy to the decision at every stage of discussions. Anand Piramal, the son of Ajay Piramal, held no position in the company or board. Laddha was PEL’s ED and COO while Nohria was a consultant.

SEBI’s case was that information on the deal was disclosed to entities who were not required to know about it. But SAT differed, saying: “None had taken any advantage of the situation; no investor has been adversely affected and nor is the offence repetitive in nature.”

PEL, represented by Senior Counsel Pesi Modi with Regstreet Law Advisors, argued that information was given to Anand Piramal only on a ‘need to know’ basis, per SEBI rules.

As a promoter of PEL with a 2 per cent stake, Anand Piralmal had to give an undertaking relating to multiple clauses in the Abbott deal, SAT observed.

“Hence, he had to know in advance the decision relating to the sale of the business. There is no charge that Anand Piramal indulged in insider trading when he was in possession of this information,” it added.