Sebi had alleged that the firm engaged in an insider trading activity while it was under the control of its erstwhile promoters, Ramalinga Raju and his family
Mumbai: The Securities Appellate Tribunal (SAT) on Monday stayed an order passed by the Securities and Exchange Board of India (Sebi) on 10 September against IL&FS Engineering and Construction Co. Ltd over alleged insider trading in the company, in its previous avatar as Maytas Infra Ltd.
In 2009, IL&FS took control of Maytas, after a ₹ 7,000-crore accounting scandal erupted at its sister concern, Satyam Computers Ltd.
The company was subsequently renamed IL&FS Engineering and Construction.
Sebi, in its September order, penalized the company along with nine other entities, including B. Ramalinga Raju, the former Satyam Computers chairman, and his family.
They were asked to return a total of over ₹ 1,800 crore, which the 10 entities allegedly made illegally by involving in insider trading activities.
The order had directed IL&FS Engineering and Construction Co. to return ₹ 59.16 crore, along with annual simple interest of 12% from 7 January 2009 till the date of payment.
Sebi had alleged that the company engaged in an insider trading activity while it was under the control of its erstwhile promoters, Ramalinga Raju and his family.
Acknowledging that IL&FS had acquired Maytas and renamed it IL&FS Engineering and Construction Co. after the fraud, the market regulator said the latter wasn’t involved in the fraud, but added that “unlawful gains made on account of insider trading by Maytas and lying with IL&FS Engineering and Construction Co. cannot be allowed to be retained by it".
SAT has scheduled the next hearing on the matter on 12 January 2016, IL&FS said in a BSE filing.
Those against whom Sebi passed the order included SRSR Holdings (controlled by the Raju brothers); IL&FS Engineering and Construction (formerly known as Maytas Infra that was controlled by Raju and his two sons); Raju’s mother B. Appalanarasamma, and his two sons Teja Raju and Rama Raju Jr.; his brother Suryanarayana Raju and B. Jhansi Rani (wife of Suryanarayana); Chintalapati Srinivasa (then director of Satyam), his father Anjiraju Chintalapati (since deceased) and Chintalapati Holdings Pvt. Ltd.
While passing the order, Sebi’s whole-time member Rajeev Kumar Agarwal had said prohibitions on insider trading are intended to ensure that insiders in a company do not breach their fiduciary duty towards investors and other stakeholders.
In the present case, the 10 entities were found to be guilty of misusing insider information to make illegal gains by trading in the shares of Satyam.
The entities were directed to pay back the money within 45 days by way of a demand draft in the name of Sebi.
The market regulator’s September order was a follow-up to its July 2014 order which barred Raju and four others from the markets for 14 years and ordered them to return ₹ 1,849 crore of illegal gains along with interest.
In January 2009, Raju admitted to fudging the books of the company over several years to the tune of ₹ 7,136 crore.
On 10 April that year, a special court sentenced Raju and nine others to seven years of rigorous imprisonment after convicting them.
All 10 have challenged the verdict.
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