Apex Frozen Foods CMD, Wife, Son-in-Law Asked to Disgorge Rs91 Lakh Earned Illegally During UPSI Period, Barred from Markets for 2 Years
Moneylife Digital Team 31 March 2023
While imposing a penalty of Rs32 lakh, market regulator Securities and Exchange Board of India (SEBI) directed Apex Frozen Foods Ltd (AFF)’s promoter, chairman, and managing director (CMD) Satyanarayana Murthy Karuturi, his wife and promoter Padmavathi and their son in law Ravi Kanth Sankuratri to disgorge Rs91.06 lakh earned illegally while in possession of unpublished price-sensitive information (UPSI). SEBI also banned all three from markets for two years. 
In the order, VS Sundaresan, executive director (ED) of SEBI, says, “ It has been established in the present case that the noticees, (Mr Karuturi and others) being insiders, bought the shares of AFF when in possession of UPSI and violated the provisions of PIT Regulations and SEBI Act… I note that the show cause notice (SCN) has indicated that noticee nos1, 2 and 3 have respectively made notional profits of Rs14,62,875, Rs40,76,229 and Rs35,67,260 by trading in the shares of AFF in violation of provisions of SEBI Act and PIT Regulations in the manner discussed earlier. The said notional profits out of the insider trading were arrived at as the difference between the average price of purchase of shares of AFF by the noticees and the closing price of shares of AFF on the next trading day after the announcement of financial results, i.e., 15 November 2017.”
Mr Vasudeven also pointed out that the violations by Mr Karuturi, his wife and the son-in-law have been noticed in the very first quarter of AFF getting listed on the stock exchanges. AFF got listed on 4 September 2017.
SEBI investigation found that during the UPSI period, the CMD bought 23,500 shares of AFF, worth Rs 99.34 lakh. Hiw wife, Padmavathi bought 70,183 shares for Rs2.99 crore, while Mr Sankuratri bought 30,947 shares for Rs1.14 crore.
However, the son-in-law’s declared income was between Rs5 lakh and Rs10 lakh and he had not traded for six months in any scrip, before buying shares in AFF. SEBI also found that the company CMD transferred Rs3 crore to Mr Sankuratri account to allow him to buy the company shares. Further, on 23 April 2017, Ms Karuturi received Rs54.11 lakh from AFF, which was also transferred to the account of the son-in-law on the same day. 
From the bank statements of Mr Sankurari, it was revealed that he had used Rs3.54 crore received from Mr Karuturi and Ms Karuturi for trading in the shares of AFF during the UPSI period. 
On 14 November 2017, the company declared its September 2017 quarter results with a profit of Rs22.04 crore, compared with Rs16.64 crore in June. 
Following the results, AFF's share price witnessed a meteoric rise during November and December 2017. AFF registered a rise of 73.54% in 32 trading days after touching a high price of Rs939 on 7 December 2017, SEBI investigation shows.
Holding the three responsible for insider trading, the SEBI ED directed them to disgorge profit earned through AFF share purchase. While the company CMD and his wife are asked to pay a penalty of Rs11 lakh each, their son-in-law is penalised Rs10 lakh for violating rules during UPSI period. All three are also barred from markets for two years.
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