According to sources, following a green signal given to the regulator by the Mumbai high court by first staying the appellate authority order and then observing that Sebi was free to file a complaint for prosecution in this case, the markets regulator would in all probability go ahead and initiate prosecution proceedings against HLL's directors, indicted by it for alleged insider trading.

Sebi insiders pointed out that it is felt that if it does not move ahead and file the prosecution after the relief granted by the Mumbai high court, it could be"misunderstood".

According to sources, Sebi is expected to take a final view on the matter only after it receives a copy of the order and has discussed the contents of the same with its lawyers.

The prosecution proceedings would constitute a criminal suit. The current matter of whether HLL was an insider and whether a compensation needs to be slapped against it was a civil suit. "The two matters can run concurrently. We do not feel that the filing of the prosecution is time barred, but even if it is the magistrate will decide on this. Given the go-ahead by the Mumbai high court, it is only expected that we would file a complaint before a magistrate for initiating prosecution against HLL's directors," said a source.

The Sebi order had two parts to it. The first part directed HLL to compensate Unit Trust of India to the extent of Rs 3.04 crore. The second part of the order was to initiate prosecution against HLL's directors for having violated the Act by indulging in insider trading.

The Sebi order hadgranted HLL a month's time to file an appeal against its order. Subsequently, HLL moved the appellate authority which on July 14 this year struck down the Sebi order despite agreeing with most of its findings.

Through this period, Sebi did not initiate prosecution proceedings as it wanted to get a verdict from the appellate authority. However, when the appellate authority gave a verdict against Sebi, it moved the high court.