'SEBI order against Polaris promoter not to impact stake sale deal'

The SEBI order against Arun Jain, chairman and managing director of Polaris Software Lab Ltd (now Polaris Consulting and Services) will not have any impact on the stake sale deal with Virtusa, said a senior legal official of the firm.

The Securities and Exchange Board of India (SEBI) in an ad-interim ex-parte order on November 24 impounded around Rs.2 crore alleged unlawful gains by Jain and former chief financial officer (CFO) R.Srikanth made from insider trading.

"In my view, the SEBI order against Jain will have nil impact on the stake sale deal with Virtusa. The interim directions of SEBI have been complied with," the official, who did not want to be named, told IANS.

The alleged insider trading case against Jain pertains to the shares purchased by him in 2008.

SEBI also directed the two not to dispose off or alienate any of their assets/ properties/ securities, till such time the alleged unlawful insider trading gains are credited to an escrow account.

According to SEBI, the alleged gain from insider trading for Jain was Rs.1,84,68,558 and for Srikanth was Rs.19,69,471.

The SEBI also ordered banks and depositories should not make any debits in the accounts of Jain and Srikanth without its permission.

The markets regulator also directed the two individuals to provide within seven days of its order, a full inventory of all their assets and properties and details of all their bank accounts, demat accounts and holdings of shares/securities, if held in physical form and details of companies in which they hold substantial or controlling interest.

On November 5, Polaris Consulting said it has entered into a definitive share purchase agreement (SPA) with Virtusa Corporation whereby a subsidiary of Virtusa will acquire approximately 53 percent of its paid-up share capital.

The American company will buy the shares at a price of Rs.220.73 per share from certain promoter entities led by Jain and certain other shareholders, including OrbiTech Private Ltd (formerly known as Orbitech Ltd). The total deal size is around Rs.1,173 crore.

According to the senior legal official of Polaris Consulting, what ever disclosures have to be as per law were made by Jain regarding the shares purchased in 2008.

The official answered in negative when asked about shares of Polaris Consulting purchased by Jain between the time of the decision to sell off the stake to Virtusa and its ultimate disclosure to the stock exchanges on November 5.

Reacting to SEBI's order, Jain in a statement issued late Thursday said the matter pertains to a set of facts of 2008 pursuant to which an investigation was conducted.

"Based on conjecture, SEBI has concluded that the trades were made while in possession of unpublished price sensitive information.

"The interim order by its very nature is not a conclusive finding. 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," he said.

"Meanwhile, to demonstrate bonafides, the amount asked to be deposited by SEBI has been deposited under protest," he added.

In an earlier matter, SEBI's October 2012 order involving selling of 15,080 shares was quashed by the Securities Appellate Tribunal in December 2013 with SEBI unconditionally allowing the appeal.

"In the last 13 years since March 2002, I have not sold a single Polaris share," Jain said.

The Polaris legal official does not foresee any delay in concluding the deal with Virtusa and SEBI banning transfer of his holdings to Virtusa.

Apart from Jain's, SEBI has to consider the interests of several public shareholders, he said.

Meanwhile the Polaris Consulting scrip closed at Rs.206.50 on BSE on Friday as against the previous day's closing price of Rs.203.15.