The Securities Appellate Tribunal (SAT) has quashed a February 2021 order passed by the Securities and Exchange Board of India (SEBI) which had barred the Founder and CEO of Future Group Kishore Biyani from dealing in the securities market for one year.
A coram comprising Presiding Officer, Justice Tarun Agarwala and Technical Member, Meera Swarup disagreed with SEBI's finding that Biyani and Future Corporate Resources Private Limited (Future) had violated insider trading regulations in 2017 by making trades based on unpublished price sensitive information (UPSI).
The SEBI had concluded that Biyani, Future, and some others had made trades based on UPSI (insider trading) concerning a proposal to demerge home retail business HomeTown from Future Retail Limited and merge it with FabFurnish instead.Terming this a violation of the prohibition of insider trading, the SEBI had prohibited Biyani and Future from making any trades for a year through an order passed on February 3, 2021. The order was stayed by the SAT days later following an appeal filed by Future, Biyani and others.
In its final verdict dated December 20, 2023, the SAT found that the information concerning the proposed demerger and merger was already "generally available" in the public domain through media interviews and articles much before the trades in question were made. Therefore, such information was not UPSI, the appellate tribunal ruled.
"Publication of information regarding the transaction which was reported in multiple print and digital publication including Economic Times, The Hindu Business, Business Lines, The Money Control, etc. wherein the nature of transactions was highlighted in depth clearly leads to an irresistible conclusion that information of the transaction was generally available," the SAT noted.The SAT further held that "generally available information" is not just information disclosed to the stock exchange but could also include any information accessible to the public on a non-discriminatory basis (such as information published in the media).
"We find that the WTM (of SEBI) has failed to appreciate that the significance, dominance and outreach of the media in financial sector reporting impacts investor sentiment and behavior and impacts the securities market. We find that the publication of information regarding the transaction was also reported in multiple print and digital publications, including Economic Times. The Hindu Business Line, DNA India, Money Control, Live Mint, VCCircle, Inc42, India retailing Bureau etc. and various research reports where the imminence and nature of the transaction were highlighted in depth have been entirely ignored by the WTM," the SAT added.The SAT also pointed out that the SEBI itself had earlier acknowledged that "if the transaction(s) are in the public domain through newspaper reports / interviews then trading on the basis of such information cannot be treated as UPSI" in at least two cases, namely in a 2018 ruling concerning 63 moons and a case concerning Bharti Airtel decided in 2020.The SAT, therefore, allowed the appeal filed by Biyani, Future and others against the SEBI's 2021 ruling and quashed the SEBI order barring them from the securities market.
"In view of the aforesaid, we are satisfied that the information relating to de-merger was already in the public domain and, therefore, trading done by the appellants in the shares after the publication of the interviews and news reports cannot be considered as trading while in possession of UPSI. Thus, the charge in the show cause notice fails and the findings given by the WTM cannot be sustained. The impugned order is quashed. All the appeals are allowed with no order as to costs," the SAT held.
The appellants, Future Corporate Resources, Kishore Biyani, and other entities were represented by advocate Somasekhar Sundaresan (now a Bombay High Court judge) along with the Trilegal team led by Partner, Shruti Rajan, and Senior Associate, Vivek Shah.
SEBI was represented by Senior Advocate Shiraz Rustomje with advocates Manish Chhangani, Samreen Fatima, and Sumit Yadav, briefed by The Law Point.
TAGS: SEBI Insider trading Kishore Biyani SAT Information Demerger Merger Generally available
