This would be one of the few cases where CMD of a company has come under the scanner in a insider trading case.
The prohibitory orders would continue till further orders, as SEBI is still continuing its investigations into the matter involving trading in Gammon Infra shares on the basis of access to 'unpublished price sensitive information' during August-September 2013 period.
Rajan served as Chairman and Managing Director of Gammon Infra till September 20, 2013 and continues to be on the company's board thereafter. Besides, Rajan remains CMD of another listed group firm Gammon India Ltd, where he also holds 5.99 per cent direct and another 29 per cent indirect stake.
In its ad-interim ex-parte order, SEBI also sought a reply, if any, within 21 days from Rajan, who was earlier in December 2006 also barred from capital markets for a period of one year for his alleged role in the rights issue of Gammon India Ltd.
In that case, the Securities Appellate Tribunal had also dismissed his plea against the then SEBI order.
In the present case, the Securities and Exchange Board of India (SEBI) found that Rajan, being an 'insider', had access to the 'unpublished price sensitive information' and was in possession of the same and he dealt in the shares of GIPL on the basis of that.
"I find that it is imperative for SEBI to deal firmly with such instances of violation by persons in charge of affairs of listed companies in order to send a stern message to deter indulgence in such activities by others as such activities apart from being detrimental to the interests of investors endanger the integrity of the whole securities market," SEBI's whole-time member Rajeev Agarwal said in his order.
SEBI had begun its probe based on inputs from National Stock Exchange that "there is a possibility that certain clients might have traded on the basis of unpublished price sensitive information" in shares of Gammon Infra Projects Ltd (GIPL).
In its preliminary probe, SEBI observed that GIPL was an infrastructure project development company promoted by Gammon India Limited (holding 71.93 per cent stake).
Another promoter of GIPL is Gactel Turnkey Projects Limited holding 3.05 per cent stake which is also the subsidiary of Gammon India Limited.
On September 3, 2013, GIPL disclosed the termination of a Shareholders' Agreement dated April 26, 2012 with Simplex Infrastructures Limited (SIL) for purchasing 49 per cent equity stake in Maa Durga Expressways, promoted by SIL and selling 49 per cent stake in Vijayawada Gundugolanu Road Project Private Limited, promoted by GIPL.
The total project cost as per National Highways Authority of India (NHAI) concession agreement for Vijayawada Road Project and Maa Durga Expressways was Rs 1,648 crores and Rs 940 crores respectively.
On August 9, 2013, resolution for termination of agreement was passed in the board meeting of GIPL and the said Termination Agreements were signed on August 30, 2013 by SIL and GIPL.
Sebi found that on August 22, 2013, Rajan sold 1.44 crore shares held by him in GIPL (representing about 70.56 per cent stake) for an aggregate value of Rs 10.27 crore.
On that day, the total traded volume in the scrip was 1.45 crore on both exchanges-- NSE and BSE-- and out this total traded volume, Rajan traded in 1.44 crore shares.
Sebi said that the 'unpublished price sensitive information' about the termination of the shareholders' Agreement dated April 26, 2012 was in existence from the second week of July 2013 and it remained unpublished till September 3, 2013 when the disclosure with regard to the same was made to the exchanges.
"Rajan, CMD of GIPL sold his shares in GIPL as on August 22, 2013 on the basis of the 'unpublished price sensitive information' about the termination of the Shareholders' Agreement between GIPL and SIL which was published on September 3, 2013. Thus, he engaged in insider trading," SEBI said.