SAT quashes Sebi's order against Biyani, others in insider trading case

The Securities Appellate Tribunal (SAT) on Wednesday quashed regulator Sebi's order banning Future Retail chairperson Kishore Biyani and some other promoters from the securities market for one year in an insider trading case.

Dismissing the Sebi's order, the appellate tribunal said that the entities did not trade in the shares of Future Retail Ltd (FRL) on the basis of unpublished price sensitive information (UPSI) relating to demerger as such information was already in public domain through multiple media reports.

"We are satisfied that the information relating to de-merger was already in the public domain and, therefore, trading done by the appellants in the shares after the publication of the interviews and news reports cannot be considered as trading while in possession of UPSI. Thus, the charge in the show cause notice fails and the findings given by the WTM cannot be sustained. The impugned order is quashed," a bench comprising Presiding Officer Tarun Agarwala and Technical Member Meera Swarup said.

Further, two authorities of Sebi -- WTM (Whole Time Member) as well as the Adjudicating Officer -- accepted that if the transaction is in the public domain through newspaper reports/ interviews then trading on the basis of such information cannot be treated as UPSI, the tribunal noted.

The ruling came after the entities challenged an order passed by the Securities and Exchange Board of India (Sebi) in February 2021 that had barred Kishore Biyani and certain other promoters of Future Retail Ltd from the securities market for one year for indulging in insider trading in the shares of the company.

In addition, the regulator had imposed a fine of Rs 1 crore each on Kishore Biyani, Anil Biyani and Future Corporate Resources. Besides, they were asked to disgorge Rs 17.78 crore for the wrongful gains made by them.

Sebi had conducted an investigation in the scrip of FRL to ascertain whether certain persons and entities had traded during the March 10, 2017 to April 20, 2017 period on the basis of UPSI pertaining to the segregation of certain business of the firm.

FRL made a corporate announcement to the stock exchanges on April 20, 2017, regarding the outcome of its board meeting, wherein its board approved the segregation of certain businesses of FRL through a composite scheme of arrangement between FRL, Bluerock eServices Pvt Ltd (BSPL) and Praxis Home Retail Pvt Ltd (PHRPL) and their respective shareholders. The scheme of arrangement has, in fact, resulted in the demerger of certain businesses of FRL.

Sebi, in its order, found that Future Corporate Resources had traded in the shares of FRL during the UPSI period and made notional unlawful gains of Rs 17.78 crore.

"We find that the WTM has failed to appreciate that the significance, dominance and outreach of the media in financial sector reporting impacts investor sentiment and behaviour and impacts the securities market. We find that the publication of information regarding the transaction was also reported in multiple print and digital publications... and various research reports where the imminence and nature of the transaction were highlighted in depth have been entirely ignored by the WTM," the tribunal noted.