Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs25 lakh each on Videocon group chief Venugopal Dhoot, Electroparts (India) Pvt Ltd and Videocon Realty and Infrastructures Ltd for insider trading in the scrip of Videocon Industries Ltd.
In an order, G Ramar, adjudicating officer (AO) of SEBI, says, "Indulging into trading activities to take advantage of being an insider tantamount to committing fraud upon the other investors of the securities market, who for the reason of not having the inside information, fail to reap similar benefits for themselves."
"I hold that the noticees being insiders had executed off-market transactions while in possession of unpublished price sensitive information (UPSI), and thus they have violated of Regulation 4(1) of SEBI PIT Regulations, 2015 read with Sec 12A (d) & (e) of SEBI Act, 1992," the AO says.
SEBI had received two complaints alleging a fall in the price of Videocon Industries scrip from 3rd April to 29 September 2017. After conducting the investigation, the market regulator issued show-cause notices to the three and also provided them opportunities for a personal hearing. However, there was no response from Mr Dhoot, Electroparts and Videocon Reality.
Videocon loan account, sanctioned and disbursed by Dena Bank, was classified as a non-performing asset (NPA) by the bank on 1 March 2017. On 9 March 2017, in a press meet, Dena Bank informed that the loan account of Videocon Industries of Rs520 crore had been classified as NPA. Officials of Dena Bank had met Mr Dhoot in his office and requested him to clear the bank's dues and regularise the account. SEBI considered the period between 1st March and 9 March 2017 as the period of UPSI.
Mr Dhoot held a 7.26% stake in Electroparts. However, along with his close relatives, he held almost 89% shares in the company. During the UPSI period, Electroparts transferred shares of Videocon Industries, which Mr Dhoot authorised.
He was also holding a 10% stake in Videocon Reality. The company had pledged shares of Videocon Industries for financial assistance availed by Electroparts. Similarly, Electroparts had pledged or transferred its shares of Videocon Industries to other entities through off-market for financial assistance availed by Videocon Reality, which suggested that both the promoter entities were working in conjunction, SEBI says.
The order says, "Authorised representative Mr Dhoot, was insider, traded on behalf of the two promoter companies of VIL, Videocon Realty and Electroparts, who were also insiders, during the UPSI period, which violates Regulation 4(1) of SEBI PIT Regulations, 2015 and Section 12A (d) & (e) of the SEBI Act ,1992 by the noticees."