Court AdjournsHearing On HLL Insider Trading Case

Mumbai, October 19: | Updated: Oct 20 2002, 05:30am hrs
The court of additional chief metropolitan magistrate, NM Gosavi on Saturday adjourned hearing on the matter related to the prosecution of five directors of Hindustan Lever Ltd (HLL) to mid-January next year, in response to a criminal complaint filed by the Securities and Exchange Board of India (Sebi).

The court had issued process of summons on September 16 in the name of five HLL directors in the alleged offence under Sebi (insider trading) Regulations and Sebi Act (1992) to remain present in the court on October 18.

The matter came up for hearing on Friday, but was later adjourned to mid-January.

Earlier, the Mumbai High Court had directed the Metropolitan Magistrate Court to expedite the decision-making process in the matter of criminal complaint filed by Sebi against HLL and its directors in 1998.

Sebi had launched criminal prosecution against the company and its directors for alleged violation of the Sebi (prohibition of insider trading) Regulations, 1992, in the course of the merger of Brooke Bond Lipton India Ltd (BBLIL) with HLL.

Sebi had said, aggrieved by the inordinate and abnormal delay in taking cognizance of the offence against the accused by the magistrate, we filed a criminal writ petition in the Bombay High Court on August 14, 2002. The Bombay High Court allowed the writ petition filed by Sebi and directed the magistrate to proceed in the matter without any further delay.

The magistrate, before whom the complaint was filed by Sebi, had not taken a decision in the matter for more than three years and the matter continued to be adjourned for the last three years, Sebi had said. It may be recalled that Sebi had levelled insider trading allegations against.

HLL and five of its directors in August 1997, on the context that the company was privy to price sensitive information regarding the impending merger of BBLIL with it, and had purchased eight lakh shares of BBLIL from the Unit Trust of India (UTI) just before the merger, with the intention to maintain the shareholding of common parent Unilever plc, at over 51 per cent.

HLL had refuted these allegations stating that a company cannot be an insider unto itself, and that the information about the merger was generally known in the market at the time when it purchased BBLIL shares from UTI. HLL further argued that it bought these shares at a price of Rs 350, which was at a substantial premium to the then prevailing market price of Rs 318.

Sebi passed its verdict on March 11, 1998, finding HLL guilty and decided to prosecute five directors, in addition to directing HLL to compensate UTI by paying Rs 3.04 crore.

HLL then appealed to the Appellate Authority in the finance ministry, which dismissed Sebis order to prosecute HLL and its directors on charges of insider trading. Sebi then moved the high court against the Appellate Authoritys order.