The Securities and Exchange Board (SEBI) of India has penalized Future Corporate Resources Pvt Ltd, Kishore Biyani and Anil Biyani, founder and co-founder of Future group respectively, and five others for insider trading..
The SEBI found that Future Corporate Resources and FCRL Employee Welfare Trust purchased Future Retail's shares prior to the public announcement relating to the demerger of some of its businesses was made on April 20, 2017.
The SEBI further found that trades were authorised by Kishore Biyani and Anil Biyani, who hold beneficial interest in 32% and 15% shares of FCRL, respectively.
- They have been have been prohibited from dealing in securities market for a period of one year.
- They have been directed to jointly disgorge an amount of Rs 17.78 crore, along with 12% interest from April 20, 2020 onwards till the date of actual payment,which reflects the undue profits made by Biyanis, FCRL and other notices through their trade of shares on the basis of Unpublished Price Sensitive Information(UPSI), as per SEBI.
- FCRL and FCRL Employee Welfare Trust has been additionally directed to disgorge an amount of Rs. 2,75,68,650/- along with an interest at the rate of 12% per annum from April 20, 2020 till the date of actual payment.
- An additional penalty of Rupees One Crore each under Section 15G of the SEBI Act, 1992 on FCRL and Biyanis.
The order relates to the trade of shares of Future Retail Ltd (FRL) between March 10, 2017 to April 20, 2017 on the basis of unpublished price sensitive information in contravention of the provisions of the Securities and Exchange Board of India Act, 1992 read with the SEBI (Prohibition of Insider Trading ) Regulations, 2015 ("PIT Regulations, 2015").
- FCRL, Kishore Biyani and Anil Biyani have also been barred from dealing with the securities of Future Retail Ltd (FRL), whether directly or indirectly, for a period of two years.
CORPORATE VEIL LIFTED:
SEBI Whole Time Member Ananta Barua stated:
“Noticee no. 2 (Kishore Biyani) was in possession of UPSI. Noticee no. 2 and 3 (Anil Biyani) opened the trading account of Noticee no. 1 just prior to the impugned trades which were in violation of the provisions of PIT Regulations, 2015. Noticee no. 3 placed order on behalf of Noticeeno. 1. Noticee no. 2 and 3 authorised transfer of funds to Indiabulls for purchase of shares of FRL in the name of Noticee no. 1. Thus, observations made by Hon'ble SAT in Amalendu Mukherjee case (supra), where the Hon'ble SAT has observed that the corporate veil can be lifted to find out the decision maker behind a juristic person, is one of the guiding factors in the present case.”
Biyanis and Future Corporate Resources “disputed that they have indulged in insider trading” but added that they did not make “any specific submissions regarding wrongful gains made by them” The SEBI rejected the submissions of the notices that they were not in possession of the UPSI. Regulation 4(1) of the PIT Regulations, 2015 prohibits insiders from trading in securities when in possession of UPSI.
The SEBI has also clarified that the restraint on dealing with share will not apply to those existing holding of securities in respect of which any scheme of arrangement, which is under Section 230-232 of Companies Act 2013 (approved by NCLT.)