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SEBI Slaps Rs 3 Lakh Fine On Raj Kundra, Shilpa Shetty And Viaan Industries For Insider Trading

Raj And Shilpa Did Not Disclose About The Shares They Got Allotted Themselves

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Raju Vernekar
Raju Vernekar
I am a mumbai based journalist having worked with many daily newspapers.

INDIA. Mumbai: The Securities and Exchange Board of India (SEBI) on Wednesday slapped a monetary penalty on Ripu Sudan Kundra (Raj Kundra), actress Shilpa Shetty-Kundra and Viaan Industries Ltd (VIL) for disclosure lapses and consequent violation of insider trading rules.

 A fine of Rs.3 lakh was imposed on them to be paid jointly and severally within 45 days from the date of order. Shilpa and Raj are the promoters of VIL. The fine was imposed wide order No. /SBM/KL/2021-2022/ 12740-12742) dated July 28, issued under section 15-1 of SEBI act 1992, read with rule 5 of SEBI (Procedure for holding an inquiry and imposing penalties) rules 1995 by the Adjudicating Officer Suresh B Menon.

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Raj Kundra, Shilpa Shetty-Kundra, and VIL were noticees number 1,2, and 3 respectively in this matter. The SEBI issued notices after an investigation held between September 2013- December 2015 to ascertain the violation of Prohibition of Insider Trading (PIT) norms by the entities. In October 2015, VIL made a preferential allotment of 5 lakh equity shares to four persons. Of these 1,28,800 lakh shares each, amounting to Rs.2.57 crore each was allotted to Raj and Shilpa.

They were required to disclose the allotment of shares in prescribed format to the company within two trading days, from the day of acquiring the aforementioned shares. However, they disclosed the same only in May 2019. They were supposed to bring this on record so that concerned agencies including Registrar of companies, stock exchanges are aware of the changes.

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The disclosure was mandatory in terms of PIT norms since the transactions exceeded Rs.10 lakh in value. “It is on record that the relevant disclosures under the PIT Regulations were made by the Notices with a delay of more than three years. Therefore, considering these facts and circumstances, I hold that this case deserves imposition of monetary penalty upon the Notices,” Menon said in his order.

The VIL was formerly known as Hindustan Safety Glass Industries Ltd, incorporated on October 19, 1982, as a public limited company. It was initially listed on the Calcutta Stock Exchange (CSE). Thereafter, it got listed on the Bombay Stock Exchange (BSE) with effect  from February  20,  2014. The trading at CSE was stopped in 2013 and no trading took place in the scrip at  CSE.

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SEBI sent a show-cause notice to Raj, Shilpa, and VIL on April 16 this year calling for explanation. Besides, they were given an opportunity of personal hearing in the matter on July 05 this year, through the online Webex platform. Ms. Shailashri Bhaskar appeared as the authorized representative on their behalf. She refuted the charges.

However, SEBI noted that “ It can reasonably  be concluded that  Raj, Shilpa, and VIL were aware  of the  allotment  of 1,28,800 shares were made on October 29, 2015. As such it was expected of VIL to make the necessary disclosures to BSE under Regulation 7(2)(b) of the PIT Regulations within two trading days from the date of allotment of the shares.

The VIL disclosed this to BSE, belatedly during May  2019, after a delay of over three years. Given this its contention that it had not violated the provisions of Regulation 7 (2) (b) of the PIT Regulations was baseless and without any merit. Therefore, I hold that VIL has violated the provisions of Regulation 7(2)(b) of the PIT Regulations” Menon stated. 

Besides the contention of the notices that the delay in making the necessary disclosures under the PIT Regulations was due to inadvertence and without any malafide intention cannot be accepted. The disclosure requirements mandated under the respective regulations serve a very important purpose. The stock exchange is informed so that the investing public is made aware of the status”, Menon stated.

Raj Kundra’s bail plea rejected

In the meanwhile on Wednesday, the 37 th metropolitan magistrate, rejected the bail plea of Raj Kundra, arrested in a case of alleged creation of pornographic films and publishing them through apps, after the prosecution contended that the police probe was still on and his release at this juncture will derail the investigation.

On the other hand, Raj Kundra’s lawyer made a forceful plea for bail in the court, saying his client was not a “terrorist” and pointed out that a charge sheet has already been filed in the case which was registered in February. The 45-year-old businessman was arrested on 19 July by Mumbai police’s crime branch after being charged under relevant sections of the Indian Penal Code, the Information Technology Act, and the Indecent Representation of Women (Prohibition) Act.

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