Satyam case: SAT rejects Ramalinga Raju plea in insider trading practices

The Securities Appellate Tribunal (SAT) rejected the appeal of B Ramalinga Raju, chairman of erstwhile Satyam Computer Services, over violation of rules on insider trading and unfair trade practices. SAT asked Securities and Exchange Board of India (Sebi) to pass fresh order on amount of “illegal gains” to be disgorged. Going by the Sebi order, the disgorgement amount was Rs 1,849 crore, plus 12 per cent annual interest.
 
In the order, SAT set aside the order by Sebi. “In these circumstances, we set aside the impugned (challenged) order to the extent it relates to the period for which the appellants are restrained from accessing the securities market and the quantum of illegal gain directed to be disgorged by the appellants and remand the matter to the file of the whole-time member of Sebi for passing fresh order on merits and in accordance with law," SAT said in an order on Friday.

 
According to SAT, the show-cause notice sent to Raju had demanded disgorgement of the “illegal gains” made by him. However, it did not speak anything about the gains made by other connected parties. “Thus, on the one hand, illegal gain made by the connected entities was considered to be the illegal gain made by Ramalinga Raju and Rama Raju and on the other hand, illegal gain made by the connected entities was considered to be the illegal gain made by each member of the connected entity group individually. From the aforesaid two sets of show-cause notices, it is apparent that Sebi itself was not clear as to who had made illegal gains and who should be directed to disgorge the illegal gains arising on sale/transfer of Satyam,” the order observed.

 

SAT also asked Sebi to pass a fresh order deciding the quantum of punishment in accordance with the current regulations within four months. According to SAT, the directions by Sebi in the case of the illegal gains were based on criteria which were unsustainable in law. “(These) directions are given without application of mind,” it said in the order.
 
Over a five-year-long investigation, Sebi barred Raju and four others from acessing securities markets for 14 years in 2014 and asked them to disgorge “unlawful gains” with 12 per cent interest annually.
 
SAT also referred to the letter written by Raju admitting his guilt in January 2009. SAT said the Sebi show-cause notices issued to the appellants clearly establish that the appellants were instrumental or involved in inflating or manipulating the books of Satyam during the period from 2001 to 2008. That information was price-sensitive and while in possession of that unpublished price-sensitive information, appellants had sold or transferred shares of Satyam and made huge profits.

 
“In these circumstances, decision of the whole-time member that the appellants violated the provisions contained in the Sebi Act —Prohibition of Fraudulent and Unfair Trade Practices Regulations and Prohibition of Insider Trading Regulations — cannot be faulted,” it added.