Mumbai: Market regulator SEBI on Wednesday dismissed allegations of insider trading by Manoj Modi, a close aide of RIL chief Mukesh Ambani, saying charges could not be established after its probe into the six-year-old matter about dealings in shares of erstwhile IPCL.
SEBI also dismissed insider trading charges against Modi's wife Smita Modi.
"Considering the facts and circumstances of the case and available records, the alleged violation of... Prevention of Insider Trading Regulations... Against Manoj Modi and Smita Modi do not stand established and the matter is, accordingly, disposed of," SEBI said Wednesday.
The regulator said charges of Manoj Modi being an 'insider' as per SEBI's Prevention of Insider Trading regulations could not be established, and consequently, the allegation against Smita was also not established.
The order follows a SEBI investigation into trading of shares of Indian Petrochemicals Corporation Ltd, an erstwhile subsidiary of Reliance Industries Ltd (RIL) that was later merged with the parent company, during the period from February 22, 2007 to March 8, 2007.
SEBI had found that IPCL shares had witnessed an unusual plunge of over 8 percent on March 5, 2007 despite the announcement of an interim dividend, but witnessed a major surge of over 14 percent on March 8-9 that year subsequent to an announcement of amalgamation of IPCL with RIL.
Consequently, SEBI had ordered a probe into alleged violations of insider trading regulations by Manoj Modi and Smita Modi, by way of trading in the company's shares on the basis of price-sensitive information relating to the dividend and amalgamation matters.
In its 18-page order, SEBI said Wednesday that Manoj Modi admitted to have served as consultant to Mukesh Ambani, then Chairman of IPCL, and as director of Reliance Petroleum during that period, as also having served on the board of another group company, Reliance Retail Ltd.
It was alleged that during the period from February 28, 2007 to March 2, 2007, Manoj and Smita Modi together bought one lakh shares of IPCL for Rs 257.82 lakh prior to announcement of declaration of interim dividend and amalgamation of IPCL with RIL.
It was further alleged that Manoj and Smita Modi did not sell any shares of RIL and received the dividend amounting to Rs six lakh, while pursuant to to merger of IPCL with RIL in October 2007, the two received 20,000 shares of RIL as against 1,00,000 shares of IPCL acquired prior to the dissemination of the price sensitive information.
It was alleged that the two were in possession of unpublished price sensitive information while trading in 1,00,000 shares of IPCL, as Manoj Modi was a 'connected person' and and therefore an 'insider' and Smita was also a connected person and an 'insider' being his wife.
While proceedings were continuing, Manoj and Smita modifiled consent application on November 21, 2011 for settlement of the matter, but the pleas were later rejected and they were communicated about the same on November 1, 2012.
Later during their personal hearing, the two informed SEBI and they have been active long-term investors in various stocks for more than a decade and furnished details for the same.
They also said that the concerned trades were done "on the basis of charts, economic survey, worldwide demand and supply of petrochemicals, budget and the opinions expressed by reputable and credible analysts - recommending purchase of the Company's (IPCL's) stock based on performance in the FY 2006-07. Further, the budget of February 28, 2007 seemed beneficial for petrochemical companies."
The two persons further said that the information regarding interim dividend was known only to Mukesh Ambani and three others and not to anyone else prior to the notification to stock exchange by IPCL on March 2, 2007.
During his deposition before SEBI, Manoj Modi said that he acts as professional consultant to Mukesh Ambani and was involved in Reliance Retail project, while his consultancy with Reliance Group of Companies/ group companies of RIL was only for new business ventures.
He also stated that he was not involved in decision making process or day-to-day functions of either RIL or IPCL during 2006-07.
In his reply, Modi further contended that the "so-called close proximity between him and Mukesh Ambani is a rationale wholly foreign and unknown to the definition of connected person as contained in SEBI's Prevention of Insider Trading regulations.