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Sebi has barred fugitive businessman Mehul Choksi and one Rakesh Girdharlal Gajera from the capital markets for one year and levied a fine totalling Rs 2.5 crore on them for violating insider trading rules in the matter of Gitanjali Gems.
In addition, they have been restrained from buying, selling or otherwise dealing in securities of Gitanjali Gems Ltd (GGL) for a period of two years.
Also, the Securities and Exchange Board of India (Sebi) has directed Gajera to disgorge a sum of Rs 15.82 crore.
Choksi, promoter and managing director of Gitanjali Gems, is the maternal uncle of Nirav Modi, both of whom are facing charges of defrauding state-run Punjab National Bank (PNB) of over Rs 14,000 crore.
Both Choksi and Modi fled India after the PNB scam came to light in early 2018. While Choksi is said to be in Antigua, Modi is lodged in a British jail and has challenged India's extradition request.
In its order, Sebi said Choksi communicated unpublished price sensitive information (UPSI) to Gajera, who sold his entire shareholding of 5.75 per cent in GGL in December 2017 with the intention of avoiding loss ahead of the disclosure of fraudulent issuance of LoUs (letters of undertaking).
'Any information related to the scenario of high probability of detection of the fraudulent transactions involving LOUs issued by PNB on behalf of the Gitanjali Group, leading to such information coming into the public domain,' was considered as the UPSI.
"Noticee no. 1 (Choksi) was found to have communicated UPSI (unpublished price sensitive information) to Noticee no. 2 (Gajera) without any underlying legal obligation or any legitimate purpose," Sebi said in its 60-page final order.
Through such activities, they violated the provisions of PIT (Prohibition of Insider Trading) rules.
In addition, Sebi noted that Gajera held more than 5 per cent of the total share capital of GGL during the quarter ended September 2017 and failed to make disclosure of more than 2 per cent change in his shareholding in GGL to the exchanges in December 2017, thereby violating SAST (Substantial Acquisition of Shareholding and Takeover) Regulations.
Accordingly, Sebi has restrained the two persons from "accessing the securities market and further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, whatsoever, for a period of 1 year".
Further, the regulator imposed a penalty of Rs 1.5 crore on Choksi and Rs 1 crore on Gajera.
They have been directed to pay the fine within 45 days.
The regulator had conducted an investigation into suspected insider trading activities of certain entities in the scrip of GGL for the period May 2017 to February 2018 to ascertain whether or not the suspected entities had traded in the shares on the basis of UPSI, in contravention of PIT norms.
In February 2020, the regulator slapped a total fine of Rs 5 crore on Choksi, Gitanjali Gems and another individual for violating various regulations, including listing norms, in connection with the massive fraud on PNB.
Photograph: PTI Photo