NDTV insider trading case: SAT quashes SEBI ruling against former NDTV promoters Prannoy Roy and Radhika Roy

The Securities Appellate Tribunal (SAT) has set aside a 2020 order passed by the Securities and Exchange Board of India (SEBI) which had held the former promoters of NDTV, Dr. Prannoy Roy and Radhika Roy guilty of insider trading with respect to shares traded by them in December 2007..In an order dated October 5 (Thursday), the SAT has concluded that the NDTV shares traded by the Roys were not tied to the possession of Unpublished Price Sensitive Information (UPSI), contrary to the SEBI’s findings on this aspect..The SAT order was passed by a coram of Presiding Officer and Judicial Officer, Justice Tarun Agarwala and Technical Member, Meera Swarup..The “UPSI” in question concerned a September 2007 decision by NDTV’s Board to evaluate options for the reorganisation of the company.Prannoy and Radhika Roy were alleged to have amassed profits of almost ₹ 17 crores through insider trading in shares of NDTV while in possession of this information. In a November 2020 order, the SEBI directed them to disgorge these allegedly illegal gains of over ₹ 16.97 crores and barred them from accessing the securities market for two years. .The SAT, however, later concluded that this information (“PSI 6”) was not price-sensitive information while allowing a 2021 appeal filed by another entity, Quantum Securities Pvt. Ltd., which was also among those accused of indulging in insider trading of NDTV shares..This ruling has now proved beneficial for the Roys as well. In view of the findings in the Quantum Securities case, the SAT on Thursday allowed appeals by the Roys and concluded that they had not indulged in insider trading.“The trades of Prannoy Roy and Radhika Roy is during PSI-6. In Quantum Securities (Supra) we have already held that PSI-6 was not a price sensitive information and, therefore, the charge of insider trading during that period cannot be sustained. The matter of Prannoy Roy and Radhika Roy is thus squarely covered by the decision of this Tribunal in Quantum Securities (Supra),” the SAT has ruled..The SAT also rejected the SEBI’s allegation that the Roys had violated NDTV’s Code of Conduct.“We find that Prannoy Roy and Radhika Roy had secured pre-trade clearance from the Compliance Officer of NDTV which is an admitted fact in the show cause notice and, therefore, the trades executed by these two entities was in conformity with the NDTVs Code of Conduct and the PIT Regulations. There is no finding in the impugned order to the effect that the Compliance Office had acted improperly in granting permission to these two entities to sell during the period when the trading window was closed,” the SAT said.As such, the SAT has quashed the November 27, 2020 order passed by the SEBI against the Roys. .In the same ruling, the SAT has also allowed an appeal by one, Saurav Banerjee, and held that he is also not guilty of insider trading, since he was also implicated on the ground his trades were connected to PSI-6..However, the trades executed by two others, Vikramaditya Chandra and and Ishwari Prasad Bajpai, which were tied to another piece of information dubbed PSI-3 require reconsideration, the SAT held. This aspect of the matter has been sent back for reconsideration to the SEBI. As such their appeals were only partly allowed.“Appeal … filed by Vikramaditya Chandra and Appeal … filed by Ishwari Prasad Bajpai are partly allowed. The finding against them relating to PSI-6 is quashed. The matters are remitted to the WTM to decide the issue relating to PSI-3 in the light of the observation made by this Tribunal in Quantum Securities Private Limited (Supra),” the SAT held..Senior Advocate Darius Khambata and advocate Somashekar Sundaresan along with advocates Fereshte Sethna, Abhishek Tilak, Ameya Pant, Mohit Tiwari, Karan Rukhana, Vidhi Shah, and Yugandhara Khanwilkar, briefed by DMD, appeared for Prannoy Roy and Radhika Roy. Senior Advocate Gaurav Joshi along with advocates Mihir Mody, Arnav Misra, briefed by K Ashar & Co. appeared for the SEBI. Advocate Manish Chhangani, along with advocates Sumit Yadav, Abhay Chauhan, and Atul Kumar Agrawal, briefed by The Law Point appeared for the Bombay Stock Exchange. Advocate Samiksha Rajput, along with advocate Rashid Boatwala, briefed by MKA & Co. appeared for the National Stock Exchange. Senior Advocate Khambhata along with advocates Somashekhar Sundaresan, Shruti Rajan, Vivek Shah, Vidhi Shah, Anurag Gupta and Harishankar Raghunath, briefed by Trilegal appeared for Vikramaditya Chandra and Ishwari Prasad Bajpai.Advocate Yugandhara Khanwilkar, along with advocate Robin Shah, instructed by Bodhi Legal appeared for Saurav Banerjee..[Read SAT Order]