In a partial reprieve to Manmohan Shetty, former chairman of media company Adlabs Films, the Securities Appellate Tribunal (SAT) on Friday lowered the penalty amount to Rs 25 lakh from Rs 1 crore for alleged violation of regulatory norms. Earlier, capital market regulator SEBI had slapped a fine of Rs 1 crore (Rs 10 million), which is the maximum penalty prescribed under the Act.
The reason for imposing such severe penalty was alleged violation of insider trading norms. The SAT in its order said, the charge is not of violation of insider trading regulations but only of violation of the code of conduct by selling shares during the period when trading window was closed and after the decision of the Board was communicated to the stock exchanges and disseminated on their websites.
Shetty was accused of selling shares of the company within 24 hours of making public the information on demerger of the FM Radio Business from Adlabs.
Upholding the SEBI's order, it said the appellant had violated the provisions of the code of conduct framed under the Regulations and is liable to penalty under section 15HB of the Act.
However, the amount of penalty is reduced to Rs 25 lakh. Adlabs board's decision on demerger of FM Radio business was sent by the company to the National Stock Exchange and the Bombay Stock Exchange on April 24, 2006.
However, Shetty, it alleged, sold 10 lakh shares of Adlabs Films the same day through a bulk deal. Shetty in his reply had said the sale was not based on any insider information since the decision of the Board had already been sent to the stock exchanges and was disseminated on the website of the stock exchanges.
It was further submitted that the sale of shares before expiry of 24 hours of the outcome of the Board meeting being made public was purely an inadvertent and technical error and there was no malafide intention.
