Sebi drops insider trading case against Aurobindo Pharma's promoter

40,000 share option contract in derivatives of Aurobindo Pharma were traded before quarterly results

Sebi today disposed of a case relating to violation of insider trading norms against Sumanth Kumar Reddy Mettu, promoter of Aurobindo Pharma, as the pharma company had already imposed a fine on him and also cautioned him against future defiance.

A probe conducted by Sebi found that Mettu had traded for 40,000 share option contract in derivatives of Aurobindo Pharma on May 30, 2013 during trading window closure period just before announcement of quarterly results in violation of insider trading regulations.

However, Aurobindo Pharma, on its own, had imposed a penalty of Rs 5 lakh on Mettu for indulgence into derivatives transaction in violation of code of conduct of the company, Securities and Exchange Board of India (Sebi) said in its order.

The firm had asked him to pay the amount in favour of Prime Minister's National Relief Fund, it added.

"It has been established that the company had already imposed penalty of Rs 5 lakh upon the noticee (Mettu) and also cautioned him to ensure strict compliance of code of conduct of Aurobindo Pharma to avoid such violations in future.

"...Therefore, I am of the view that... Actions taken by Aurobindo Pharma are commensurate to the violation committed by the noticee," Sebi General Manager and Adjudicating Officer Rachan Anand said.

Anand further said that action taken by the company are justifiable to such breach and further imposing of penalty upon the entity would not be appropriate and would tantamount of punishing twice for the same cause of action.

Accordingly, Sebi has disposed of the case against Mettu.