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March 11, 1998
PR No.
50/1998
ACTION AGAINST M/S. HINDUSTAN LEVER LIMITED
(HLL) UNDER THE SEBI ACT, 1992 AND SEBI
(INSIDER TRADING) REGULATIONS, 1992.
INVESTIGATION ENFORCEMENT AND SURVEILLANCE Dept.
The case relating to the allegations that Messrs Hindustan Lever Limited (HLL) as an insider purchased eight lakh shares of Brooke Bond Lipton India Ltd. (BBLIL) from UTI on the basis of unpublished price sensitive information was decided by SEBI today. HLL is an Indian subsidiary of Unilever with 5 1 % holding of the latter. Unilever also held 50.2% equity of BBLIL. Both these companies were the subsidiaries of the common parent company i.e. Unilever. With the announcement of the merger of BBLIL with HLL to the stock exchanges on April 19, 1996, there were allegations in the market regarding the leakage of information and insider trading. When these came to the notice of SEBI, it was decided to cause investigations therein.
After detailed investigations which included the recording of the statements of some of the directors of HLL and BBLIL officer of UTI, the findings of the investigation were communicated to HLL and its directors. According to these findings, prima facie, it appeared that HLL was an insider as it purchased eight lakh shares of BBLIL prior to the announcement of merger of BBLIL with HLL on April 19, 1996, on the basis of unpublished price sensitive information, HLL had violated the regulations prohibiting insider trading.
Subsequently, personal hearing was given to HLL and its directors. Their written submissions were received. On the careful consideration of the investigation report, facts on record and submissions made, SEBI has decided that Messrs Hindustan Lever Limited was an insider as it purchased eight lakh shares of Brooke Bond India Limited from UTI on the basis of unpublished price sensitive information. and as such violated sub regulation (1) of regulation 3 of the SEBI (Insider Trading) Regulations, 1992. In view of this SEBI passed the following order.
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It is directed that Messrs. Hindustan Lever Ltd. compensate Unit Trust of India to the extent of
Rs. 3.04 crores.
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It is also hereby ordered that prosecution be launched by SEBI against Messrs Hindustan Lever Limited and five directors Shri S.M. Datta, Shri K.B. Dadiseth, Shri R. Gopalkrishna, Shri A. Lahiri and Shri M.K. Sharma of Hindustan Lever Limited.
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The above mentioned direction to compensate Unit Trust of India and the order to launch criminal prosecution shall come into effect only after thirty days of the date of communication of this order to Hindustan Lever Limited and its five directors to enable the persons concerned, if they so desire to prefer an appeal, before the Appellate Authority i.e. the Central Government. |
The above mentioned amount of Rs.3.04 crores is calculated on the basis of the difference between the market prices of the shares of BBLIL sold by UTI to HLL after the announcement of the merger and prior to the announcement of the merger (excluding premiums).
The order regarding prosecution is based on section 24 read with Section 27 of the SEBI Act . While the initial findings were communicated to twelve directors of HLL who participated in the meeting, where the decision on the acquisition of shares was taken, the prosecution has been ordered only against those five directors who were present in the meeting of the Board of HLL where the decision to purchase the shares was taken and who were also members of the core team of HLL and BBLIL. The representative of Unilever had informed the core team on January 17, 1996 regarding the inprinciple approval of Unilever for the merger of BBLIL with HLL and such price sensitive information was available to these five directors.
The same knowledge about the merger before the announcement was not ascribable to the other seven directors.
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