Sahara v. SEBI
- 2022-02-17
Citation: (1998) 18 SCL 311 MOF
Facts: The facts of the case concerned the purchase by HLL of 8 lakh shares of BBLIL from the Unit Trust of India (UTI) on March 25, 1996. This purchase was made barely two weeks prior to a public announcement for a proposed merger of HLL with BBLIL.
Upon investigation, SEBI by its Order dated March 11, 1998 (Order) found that, at the time of the purchase of shares of BBLIL from UTI, HLL was an “insider” as under Section 2(e) of the 1992 Regulations.
SEBI held that, since, HLL and BBLIL were subsidiaries of the same London based Unilever, and were effectively under the same management, HLL and its directors had prior knowledge of the merger. Thus HLL was covered under the definition of an insider as above defined.
An appeal was filed by HLL against the said SEBI Order before the Securities Appellate Authority.
Issues:
Judgement:
The Appellate Authority agreed with the SEBI Order that the information available with HLL in relation to the merger was beyond merely self-generated information, i.e., information arising out of its own decision making.
It also agreed with the contentions of HLL that, for information to be considered as UPSI, it must meet the dual requirements envisaged under Section 2(k) of the 1992 Regulations
The Appellate Authority also held that for information to be generally known, it is not required to be confirmed or authenticated by the company as it would otherwise fall under the category of information “published by the company”.
It agreed with SEBI’s conclusion that information of the merger was price sensitive (though not ‘unpublished’). The matter is currently pending before the Supreme Court.
Consequences of the decision
Subsequently, SEBI by the SEBI (Insider Trading) Amendment Regulations, 2002 amended the definition under Section 2(k) to the following:
““unpublished” means information which is not published by the company or its agents and is not specific in nature.
By the same Amendment Act, SEBI also introduced a new provision, Section 2(ha) which defined “price sensitive information” to include any information relating to an amalgamation, merger or takeover as deemed price sensitive information, regardless of whether such information actually has any affect the price of the securities in the market.
However, the amendments did not definitively and expressly define “generally available information” The 2015 Regulations finally set out what constitutes UPSI by defining “generally available information” under Section 2(1)(e) as follows:
“generally available information” means information that is accessible to the public on a non-discriminatory basis;”
In 2017, the SEBI provided Kirloskar Chillers Private Limited (KCPL) with an informal guidance on broad issues. The test for UPSI laid down under the 2015 Regulations grants SEBI the ability to analyse, on a case by case basis, whether certain information is available on a non-discriminatory basis, thus achieving the balance of regulation.
