The government has decided to contest the appeal filed in the Bombay High Court by the Securities and Exchange Board of India against the appellate authority's order rejecting the charge of insider trading against Hindustan Lever Ltd.
This will be the first time the government will be confronting the regulator in court. Ironically, the swadeshi-espousing government now finds itself on the same side as the fast-moving consumer goods MNC.
The government's move follows Sebi's refusal to withdraw its appeal despite efforts from various quarters to persuade it do so.
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Top government officials said all-out efforts had been made in the last fortnight to persuade Sebi to revise its decision to contest the order. "It is a classic case of a regulator's independence not being tampered with. It should be an interesting legal tussle and would be a trend-setter," a senior official remarked while denying that pressure had been brought upon the market regulator.
The finance ministry's appellate authority had struck down Sebi's order for prosecution of Hindustan Lever Ltd in an alleged insider trading case.
It had also set aside Sebi's order that Unit Trust of India be paid Rs 3.04 crore as compensation for the purchase of 8 lakh shares of Brooke Bond Lipton India Ltd prior to the public announcement of the merger.
Sebi had alleged that members of HLL's core committee _ S M Datta, K B Dadiseth, R Gopalakrishnan, A Lahiri and M K Sharma _ had been involved in the purchase of BBLIL shares on the basis of unpublished price sensitive information.
Though the appellate authority concurred with most of Sebi's conclusions, it differed on the crucial aspect of what constitutes price-sensitive information. According to the order, while the information about the merger was known to the company, especially since there was considerable media speculation in this regard, the swap ratios were not.
However, Sebi argued that there were inconsistencies in the ruling and decided to file an appeal.
The finance ministry has been engaged in hectic consultations with HLL's lawyers. The government's reply will be finalised by the finance ministry before its submission in the High Court.