Securities Exchange Board of India (SEBI): G. Mahalingam (Whole Time Member), issued an impounding order and issued show-cause notices against the ‘Insiders’ and suspected entities who had traded in the scrip of PC Jeweller and found to be in violation of the provisions of Sections 12A(d) and (e) of the SEBI Act and Regulations 4(1) read with 4(2) of the Insider Trading Regulations, 2015.
In the present case, SEBI conducted an investigation in the scrip of PC JewellerLimited to ascertain whether or not suspected entities had traded in the said scrip during the investigation period on the basis of unpublished price sensitive information in contravention of the provisions of SEBI Act 1992 read with SEBI (Prohibition of Insider Trading) Regulations, 2015.
During the investigation, it was observed that corporate announcements by PC Jeweller had been made with respect to buyback equity shares of the Company. Price data for the scrip prior to and after the aforementioned announcements along with date and time of dissemination of the same by BSE/NSE on their websites indicated that the information pertaining to the approval &subsequent withdrawal of the buyback is considered to be price-sensitive information.
Further adding to the above, information pertaining to the buyback of equity shares of the Company, which was related to a change in the capital structure of the Company, qualified as UPSI in terms of Regulation 2(1)(n)(iii) of the Insider Trading Regulations 2015.
SEBI sought information from PC Jeweller and certain other entities regarding details of persons including Promoters/Directors/Employees and/or any other persons who were having access to and/or in possession of the information pertaining to the buyback of equity shares.
After considering the information and investigation conducted by SEBI, the Board in light of provisions of Insider Trading Regulations, 2015, the investigation identified Padam Chand and Balram Garg, Shivani Gupta, Sachin Gupta, Amit Garg and Quick Developers Pvt. Limited as ‘Insiders’.
- Padam Chand Gupta is the Chairman of the Company and as such, is connected to the Company and was reasonably expected to have access to the aforesaid UPSI–I and UPSI–II. Therefore, Padam Chand Gupta is a ‘Connected Person’ in terms of Regulation 2(1)(d)(i) of the Insider Trading Regulations, 2015 and is considered to be an ‘Insider’.
- Balram Garg was the Managing Director of the Company and was privy to the discussions/information regarding the approval for and withdrawal of the buyback of equity shares of the Company i.e. UPSI–I and UPSI–II. Therefore, Balram Garg is a ‘Connected Person’ in terms of Regulation 2(1)(d)(i) of the Insider Trading Regulations, 2015 and is considered to be an ‘Insider’.
- Shivani Gupta had traded in the scrip. Sachin Gupta (Shivani Gupta’s husband and son of Padam Chand Gupta) had traded in the scrip through the trading account of Shivani Gupta. Further, Shivani Gupta’s brother–in–law i.e. Amit Garg [nephew of Padam Chand Gupta and Balram Garg and son of Amar Chand (Ex-Vice Chairman of PC Jeweller)] had traded in the scrip through the trading account of Shivani Gupta with Karvy Stock Broking Limited.
- QDPL – The entity had traded in the scrip through Karvy.
In view of the facts, charges alleged in the instant proceedings against the above-mentioned, are brought out as under-
“Padam Chand Gupta (Chairman of PC Jeweller) and Balram Garg (Managing Director of PC Jeweller) (‘Insiders’ in terms of Regulations 2(1)(d)(i) read with 2(1)(g) of the Insider Trading Regulations, 2015) had communicated UPSI–I and UPSI–II to Shivani Gupta, Sachin Gupta, Amit Garg and QDPL (who qualify as ‘Insiders’ in accordance with Regulations 2(1)(g)(i) read with 2(1)(d)(i) of the Insider Trading Regulations, 2015 and also Regulation 2(1)(g)(ii) of the aforesaid Regulations). Accordingly, Padam Chand Gupta and Balram Garg have prima facie violated Section 12A(e) of the SEBI Act and Regulation 3(1) of the Insider Trading Regulations, 2015, by communicating UPSI–I and UPSI–II to Shivani Gupta, Sachin Gupta, Amit Garg and QDPL.”
SEBI noted the copy of a death certificate obtained from KARVY that Padam Chand Gupta passed away on 28-01-2019.
Need of the impounding order?
Non–interference by SEBI at this stage would, therefore, result in irreparable injury to the interests of the securities market and the investors. It, therefore, becomes necessary for SEBI to take urgent steps of impounding and retaining the proceeds (notional loss/gains) made by Shivani Gupta, Sachin Gupta, Amit Garg and QDPL, by way of an interim measure.
Order
A. A sum of Rs 6,17,60,184.13 shall be impounded jointly and severally, from Shivani Gupta, Sachin Gupta and Amit Garg, being the notional loss avoided on account of trades carried out in the trading accounts of Shivani Gupta, and
B. A sum of Rs 2,13,23,161.64 shall be impounded jointly and severally, from Quick Developers Pvt. Limited and Amit Garg, being the notional loss avoided/gains made on account of trades carried out in the trading account of Quick Developers Pvt. Limited.
The above-said amount has to be credited to an Escrow Account in a Nationalised Banks, by marking a lien over it.
Banks shall not allow debits from the bank accounts of Shivani Gupta, Sachin Gupta, Amit Garg and Quick Developers Pvt. Limited, to the extent of the amounts impounded, until the Escrow Account(s) as stated above are opened by them and the amounts as stated are transferred.
In light of the alleged violations of the provisions of Sections 12A(d) and (e) of the SEBI Act and Regulations, 4(1) read with 4(2) of the Insider Trading Regulations, 2015, by Shivani Gupta, Sachin Gupta, Amit Garg and Quick Developers Pvt. Limited, this Order shall be treated as a Notice under Sections 11(1), 11(4) and 11B(1) of the SEBI Act calling upon the above mentioned to show cause as to why certain directions shall not be passed against them.
This Order shall come into force with immediate effect and shall be in force till further orders.[PC Jeweller Ltd., In Re., 2019 SCC OnLine SEBI 304, decided on 17-12-2019]