Sebi interim order fines Polaris founder, ex-CFO

The Securities Exchange Board of India (Sebi) has, in an interim ex parte (without hearing the other side's defence) order ordered impounding of allegedly unlawful gains made by Polaris Consulting and Services founder Arun Jain and the company's former finance head, R Srikanth, for breaches in 2008 of insider trading rules.

The company was earlier known as Polaris Software Lab.

Sebi member Prashant Saran directed impounding of the allegedly unlawful gain for the period till the order was made of Rs 1.85 crore, including interest, by Jain, and of Rs 19.69 lakh, including interest, by Srikanth.

Jain said, "The interim order by its very nature is not conclusive. As I am keen to have this matter resolved at the earliest, I would be taking all steps as legally advised to defend myself against the serious harm to reputation caused by this order, including by contesting vigorously the contents and conclusions drawn by Sebi. The allegations are clearly denied and I am confident that upon appreciation of the robust defense that would be put up, they would be dropped."

Jain and Srikanth have also been directed to not dispose or alienate any of their assets till the amounts mentioned are credited to an escrow account created for the purpose in a nationalised bank, in favour of Sebi.

Once the money is deposited, with proof, Sebi shall allow banks and depositories to defreeze allied accounts. The two are to provide within seven days a full inventory of all their assets and properties and details of all their bank accounts, demat accounts and holdings of shares and securities.

The investigation alleged Jain and Srikanth had traded in the company's shares while in possession of 'price sensitive information'. The financial results were discussed in the board meeting and audit panel meeting on July 17, 2008. Subsequently, the results were declared to the stock exchanges, of an 87 per cent growth in net profit. In the period, the company also decided to enter into real estate business.

Jain and Srikanth were privy to this information prior to the date of announcement and their share trading activity was observed for July 2 to 4, and July 7-8, 2008.

Jain, on the other hand, contended in the past 13 years since March 2002, he'd not sold a single Polaris share. He also noted a Sebi order of October 2012 in an allied matter being quashed by the Securities Appellate Tribunal in December 2013, on appeal.

Polaris' promoters, including Jain, had on November 5 announced an agreement with US-based Virtusa under which the latter's subsidiaries were to acquire 53 per cent stake for Rs 1,173 crore, with a further intention to raise this to 75 per cent. The deal is yet to be concluded.