In July 2014, Sebi had barred Rajan after finding him guilty of trading in shares on the basis of unpublished price sensitive information.
It had also directed to disgorge an amount of Rs 1.09 crore, which was already deposited by him in an escrow account. This direction was further confirmed by the regulator through a confirmatory order passed in March 2015.
This was one of the few cases where CMD of a company came under the scanner in an insider trading case.
A Sebi probe had found that Rajan had traded on the basis of unpublished price sensitive information pertaining to cancellation of two shareholders agreement of Gammon Infra with one Simplex Infrastructure.
Setting aside Sebi's ruling, the tribunal, in an order passed on Friday, said the information in itself was not price sensitive.
"Considering the minor proportion of the transaction to the turnover of GIPL (Gammon Infra), in our view the information cannot be termed as price sensitive information. Simplex had not even disclosed the said information to the stock exchanges," the tribunal said.
Further, the tribunal said that even if it is assumed that the information is price sensitive, "still the appellant cannot be blamed of insider trading for the reasons that he did not trade on the basis of the information".
The tribunal noted that Rajan was able to show that he needed the money that he garnered from sale of shares for infusing capital in one of his firms that was undergoing corporate debt restructuring (CDR) during the time.
Besides, he was even required to sell his agricultural land and flat.
"The appellant was able to show his dire need to infuse fund in the entity under the master restructuring agreement to implement a CDR package," the tribunal said, adding that the amount was deposited in the account of CDR scheme.
Accordingly, the tribunal has set aside the order passed by Sebi and also directed the regulator to take steps to refund the amount already deposited by Rajan.