After prima-facie finding Rajan violating insider trading regulations in the company shares, SEBI has barred him from markets

Market regulator Securities and Exchange Board of India (SEBI) has barred Abhijit Rajan, former chairman and managing director (CMD) of Gammon Infrastructure Projects Ltd (GIPL) from markets for prima facie violating inside trading norms. This would be one of the few cases where CMD of a listed company has come under the scanner in an insider trading case.

In an order issued on 17 July 2014, Rajeev Kumar Agarwal, whole time member of SEBI, said, "I am of the prima facie view that this is a fit case where pending investigation, urgent action is required to be taken by way of an ad interim ex-parte order. Therefore, in order to protect the interest of investors and the integrity of the securities market, I, hereby restrain Abhijit Rajan from buying, selling or dealing in securities and accessing the securities markets, either directly or indirectly, in any manner whatsoever, till further directions."

The prohibitory orders would continue till further orders, as SEBI said it is still continuing its investigations into the matter involving trading in Gammon Infra shares on the basis of access to 'unpublished price sensitive information' during August-September 2013 period.

Rajan served as CMD of Gammon Infra till 20 September 2013 and continues to be on the company's board thereafter. Besides, Rajan remains CMD of another listed group firm Gammon India Ltd, where he also holds 5.99% direct and another 29% indirect stake.

In its ad-interim ex-parte order, SEBI also sought a reply, if any, within 21 days from Rajan, who was earlier in December 2006 also barred from capital markets for a period of one year for his alleged role in the rights issue of Gammon India.

In that case, the Securities Appellate Tribunal (SAT) had also dismissed his plea against the then SEBI order.

In the present case, the SEBI said it found that Rajan, being an 'insider', had access to the 'unpublished price sensitive information' and was in possession of the same and he dealt in the shares of GIPL on the basis of that.

"I find that it is imperative for SEBI to deal firmly with such instances of violation by persons in charge of affairs of listed companies in order to send a stern message to deter indulgence in such activities by others as such activities apart from being detrimental to the interests of investors endanger the integrity of the whole securities market," SEBI's whole-time member Rajeev Agarwal said in his order.

SEBI had begun its probe based on inputs from National Stock Exchange (NSE) that "there is a possibility that certain clients might have traded on the basis of unpublished price sensitive information" in shares of GIPL.

In its preliminary probe, SEBI observed that GIPL was an infrastructure project development company promoted by Gammon India holding 71.93% stake.

Another promoter of GIPL is Gactel Turnkey Projects Ltd and holds 3.05% stake. Gactel Turnkey is also the subsidiary of Gammon India.