Securities and Exchange Board of India (SEBI): Madhabi Puri Bach, (Whole Time Member) considering the impending danger to the interests of the investors passed an interim ex-parte order restraining all the 15 entities including Zee Entertainment Enterprises Ltd (ZEEL) from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever until further orders.
The 15 entities were — Bijal Shah, Gopal Ritolia, Jatin Chawla, Amit Bhanwarlal Jajoo, Manish Kumar Jajoo, Gomati Devi Ritolia, Daljit Gurucharan Chawla, Monika Lakhotia, Pushpadevi Jajoo, Bhawarlal Ramniwas Jajoo, Bhawarlal Jajoo HUF, Ritesh Kumar Kamalkishore Jajoo, Successure Partners, Yash Anil Jajoo and Vimla Somani.
In the pertinent matter the issue came to light after the alert system of the SEBI had generated insider trading alerts for the scrip of Zee Entertainment Enterprises Ltd. (hereinafter referred to as “ZEEL” / “Company”) for the month of August 2020 around the corporate announcement of audited financial results of ZEEL for the quarter ended June 30, 2020 made to BSE and NSE.
All the said entities had significant concentration in the scrip of ZEEL only around the announcement as compared to the earlier periods. It was observed that the Noticees were connected entities in taking long positions in the scrip in the cash and derivatives segments of ZEEL prior to the announcements and had sold the shares and squared off their open position in the scrip, subsequent to the announcement. Meanwhile, Noticees had prima facie generated substantial proceeds. The entities had used the trading accounts of their family members in order to avoid regulatory detection.
The Tribunal was of the opinion that,
“Considering the facts and circumstances of this case and violations as prima facie found in this case and prima facie repetitive and common trading pattern in the scrip of ZEEL by Noticees No. 2 to 5 during the period close to corporate announcements by ZEEL and the use of connected entities accounts to engage in prima facie insider trading activities, I am convinced that this is a fit case where, pending detailed examination, effective and expeditious preventive action is required to be taken by way of ad interim ex–parte order to protect the interests of investors and preserve the safety and integrity of the securities market. Such action needs to be taken to prevent any further harm to investors”.
And while restraining the 15 entities involved and giving due consideration to the impending danger to the interest of the potential investors, stated,
“Since the conduct of the aforementioned Noticees, do not, prima facie, appear to be in the interest of investors and the securities market, necessary action has to be taken against them immediately, else it may lead to loss of investors’ trust in the securities market. The insider trading activity not only causes notional monetary loss to investors but also has the effect of interfering with the development of securities market, as investor tend to lose faith in the securities market. The same is detrimental to the development of the securities market and qualifies as an “irreparable injury. The objective of SEBI as enshrined in the SEBI Act is not only the protection of investors but also orderly development of securities market”.[Zee Entertainment Enterprises Ltd., In re; 2021 SCC OnLine SEBI 199; decided on 12-08-2021]
Agatha Shukla, Editorial Assistant has reported this brief.