 "Sebi orders Rs 6.2 crore disgorgement from Mawana Sugars chairman")
The Securities and Exchange Board of India (Sebi) has directed Krishna Shriram, chairman of Mawana Sugars, to disgorge Rs 6.2 crore for alleged insider trading by his father, Siddharth Shriram. Siddharth was the promoter and special advisor of Mawana Sugars (MSL) until his death in May 2021. Following his death, the shares of MSL were transferred to his son, Krishna. As the legal heir, Sebi initiated proceedings against Krishna.
Sebi conducted an investigation between September 2017 and February 2018. The findings allege that Siddharth Shriram sold 2.5 million shares of MSL worth Rs 28.16 crore between October and November 2017, during the period when the company's unaudited financial results for the September quarter were being finalised. The share sale occurred while Siddharth was in possession of unpublished price-sensitive information (UPSI), according to Sebi.
The company had incurred a loss of Rs 11.13 crore in the September quarter of 2017, compared to a profit of Rs 34.18 crore in the previous quarter. By selling the shares before this information was made public, Siddharth avoided a loss of Rs 6.17 crore.
Krishna Shriram has been directed to deposit the sum along with interest at the rate of 12 per cent per annum from November 24, 2017.
Sebi stated, "Keeping in view the legal provisions and precedents surrounding the concept of disgorgement, in the instant matter, the Noticee, being the legal heir/legal representative of Siddharth Shriram, is liable to disgorge the wrongful gains/loss avoided which were made by trading in the shares of MSL while in possession of UPSI."
Siddharth was the largest shareholder of the company, holding a 69.33 per cent stake before October 2017. Krishna Shriram’s representatives argued to Sebi that the queries posed to Siddharth during the investigation did not specify the charges against him and did not give him an opportunity to explain that the alleged information was not UPSI. They further contended that the fall in the share price was a general trend across other sugar companies and, hence, there was no UPSI in the quarterly financial results.
Sebi noted that the alleged violations of insider trading resulted in unlawful gains or avoidance of loss, which later became part of the deceased's estate. Sebi pointed out that such gains are liable to be disgorged even after the individual's death, as they are related to property.