The tribunal noted that "Sebi is the watchdog and not a bulldog" and if there is an infraction of a rule, remedial measures should be taken in the first instance and not punitive measures.
The Securities Appellate Tribunal Wednesday set aside the Sebi’s order against Piramal Enterprises, chairman Ajay Piramal and others for lapses in insider trading control in connection with the sale of domestic healthcare business to Abbott Laboratories. While setting aside the Sebi order, the tribunal said, “the imposition of penalty is converted into one of warning with a further direction that if any such incident occurs in future, it would be open to Sebi to proceed in accordance with law”. In 2016, Sebi had imposed a fine of Rs 6 lakh on Piramal Enterprises and its chairman Ajay Piramal, Swati Piramal, Nandini Piramal and N. Santhanam to be paid “jointly and severally” for insider trading control lapses. While Swati and Nandini were executive directors, Santhanam was compliance officer at the time of violation.
The Sebi found that entities failed to handle the ‘Unpublished Price Sensitive Information’ (UPSI) relating to the sale of domestic healthcare formulation business to Abbott on a ‘need to know’ basis as Anand Piramal who is neither employee nor director was privy to the decision at every stage and therefore violated Insider trading norms. Besides, the company and its directors failed to close the trading window while the UPSI was unpublished. The tribunal while setting aside the Sebi’s order said that UPSI at all times was preserved and there was no misuse of UPSI by the entities. Besides, the purpose of closing the trading window is to ensure that trading is restricted during the period and even though the trading window was not closed, there was no trading of the scrips by any of the designated employees of the company, the tribunal added. Moreover, Santhanam, the compliance officer has already settled a case with Sebi in the same matter, the tribunal said.
The tribunal noted that “Sebi is the watchdog and not a bulldog” and if there is an infraction of a rule, remedial measures should be taken in the first instance and not punitive measures. “In the absence of any direct or clinching evidence of insider trading or misuse of UPSI, a reasonable benefit of doubt should be extended to the Piramal Enterprises instead of mechanically imposing a penalty,” the tribunal said.