The Securities and Exchange Board of India (SEBI), on Wednesday, dismissed allegations of insider trading against Manoj Modi, a close aide of Reliance Industries chief Mukesh Ambani, saying charges could not be established after its probe into the six-year-old matter about dealings in shares of erstwhile Indian Petrochemicals Corporation Ltd.(IPCL).
SEBI also dismissed insider trading charges against Mr. 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,” the market regulator said.
The order follows a SEBI investigation into trading of shares of IPCL , an erstwhile subsidiary of Reliance Industries Ltd (RIL), which was later merged with the parent company, during February 22, 2007, to March 8, 2007.
SEBI had found that IPCL shares had witnessed an unusual plunge of over 8 per cent on March 5, 2007, despite the announcement of an interim dividend, and had witnessed a major surge of over 14 per cent on March 8-9, 2007, subsequent to an announcement of amalgamation of IPCL with RIL.
Consequently, it 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 that Manoj Modi admitted to having 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. 6 lakh, while pursuant 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.
While proceedings were continuing, Manoj and Smita Modi filed 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 that they had 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 IPCL’s stock based on performance in 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 the stock exchange by IPCL on March 2, 2007.
During his deposition before SEBI , Manoj Modi stated that he was not involved in the decision making process or day-to-day functions of either RIL or IPCL during 2006-07.
In his reply, Mr. 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.”