Mawana Sugars Insider Trading: Promoter Siddharth Shriram's Heir Asked To Disgorge Rs6.17 Crore in Insider Trading Case

Moneylife Digital Team 19 February 2025

Investor Interest

Market regulator Securities and Exchange Board of India (SEBI) has directed Krishna Shriram (KS), the legal heir of the late Siddharth Shriram (SS), to disgorge Rs6.17 crore along with interest at 12%pa (per annum) from 24 November 2017, the last trading date of Mawana Sugars Ltd (MSL) shares until the date of the order.

In the order, G Ramar, chief general manager (CGM) of SEBI, says, " I note that the unlawful loss avoided amounted to Rs6.17 crore made by Mr SS by trading in the shares of MSL while in possession of UPSI related to the quarterly results for the quarter ending 30 September 2017. Further, pursuant to the death of Ms SS, the shares of MSL were transmitted to Mr KS. From the list of the board of directors (as of 13 August 2024) as provided on the website of MSL, I note that Mr KS is mentioned as 'the chairman of the board' of MSL. Thus, keeping in view the legal provisions and the precedents surrounding the concept of disgorgement, in the instant matter Mr KS being the legal heir or legal representative of Mr SS is liable to disgorge the wrongful gains or loss avoided which were made by trading in the shares of MSL while in possession of unpublished price sensitive information (UPSI)."

SEBI's investigation, covering September 2017 to February 2018, revealed that Mr SS sold 25 lakh MSL shares worth Rs28.16 crore between October and November 2017. This transaction occurred while the company's unaudited financial results for the September quarter were being finalised.

SEBI found that Mr SS was in possession of UPSI at the time of the share sale.

The regulator found that the financial results later disclosed that MSL had suffered a loss of Rs11.13 crore in the September 2017 quarter, a sharp decline from a profit of Rs34.18 crore in the previous quarter. By selling the shares before this information became public, Mr SS was able to avoid a loss of Rs6.17 crore, it added.

At the time of these transactions, Mr SS was MSL's largest shareholder, holding a 69.33% stake before October 2017. Representatives of Mr KS argued before SEBI that Mr SS was not given adequate notice of the charges during the investigation and was not provided an opportunity to explain why the alleged information did not qualify as UPSI.

They also contended that the drop in share prices was consistent with the broader trend in the sugar industry, suggesting that the financial results were not exclusive price-sensitive information.

SEBI, however, maintained that the insider trading violations led to unlawful gains which became part of the deceased's estate. The regulator emphasised that such gains remain subject to disgorgement even after the individual's passing, as they are considered part of their property.

As a result, SEBI has instructed Krishna Shriram, the chairman of MSL to deposit the disgorged amount along with interest at 12%pa from 24 November 2017.

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