New Delhi, Nov 28 (IANS): The Securities and Exchange Board of India (SEBI) has found that stock broker Sanjay Dutt of Quantum Securities was very closely connected to NDTV and "the instant case can be said to be imbued with all the undisputed ingredients to prove the charge of insider trading".

"Any fiduciary holds a position in trust for others. If the persons like the Noticees, who are obligated to observe fiduciary duties while exercising their powers fail to do so and instead use their position to their own advantage pecuniary or otherwise, it constitutes a fraud perpetrated on the common shareholders whose trust reposed in them has been blatantly breached. It is, therefore, of paramount importance that trading by the insiders is monitored and regulated, especially when they are in possession of UPSI. Wherever such trading results in accrual of unlawful gain, such insiders are required to forgo such gain", SEBI said in its order passed by Wholetime Member S.K. Mohanty.

"The record also bears the extent of his association or connection with the Company. The email correspondences marked to the Noticee No.1 substantiate the fact that the Noticee was privy to all the important communications pertaining to the germination as well as culmination of those PSI(s). The Noticee has not challenged the veracity of any of these communications. The connection of the remaining Noticees with the Noticee No.1 is well documented and aptly reproduced in the SCN", SEBI found with Dutt being Noticee No 1.

"Thus, the instant case can be said to be imbued with all the undisputed ingredients to prove the charge of insider trading such as; the Noticees were insiders of the Company during the relevant period, of the Company which had unpublished price sensitive information in existence during the relevant period, the Noticees had received or has had access to the relevant PSI(s) and some of these Noticees had actually traded in the shares of the Company while in possession of the unpublished price sensitive information during the UPSI period. All these elements have been found out based on the facts of the case as have been presented by the Company itself. In my view, the Noticces cannot disown these facts now by harping on a far-fetched demand that the charge of 'insider trading' has to be established by higher degree of probability based on clinching and reasonable evidence", SEBI said in its order.

"In view of the foregoing discussions, such a contention of the Noticees is divorced from facts, misleading and evasive in nature. Accordingly, it is liable to be rejected in entirety", SEBI said in its 72-page order.

Sanjay Dutt, his wife, Prenita and his three companies, Quantum Securities, SAL Real Estate, and Taj Capital Partners Pvt Ltd have been asked to disgorge the amount of wrongful gain of Rs 2.2 crore as computed in the show cause notice, along with interest at the rate of 6% per annum from April 17, 2008 till the date of actual payment of disgorgement amount along with interest, within 45 days from the date of coming into force of this order.

All these have been restrained from accessing the securities market and further prohibited them 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 2 years.

During the Investigation Period, the price of NDTV scrip increased from Rs 195 to Rs 379.55 at NSE, thereby registering an increase in the market price of NDTV scrip by 94.64%. Similar trend was observed at BSE also.

As per Memorandum of Understanding (MOU) dated September 01, 2006 and Agreement dated July 01, 2007 (collectively referred to as the "Consultancy Agreements") between NDTV and Sanjay Dutt, Noticee No. 1 was an "on call and in house" advisor/team member of NDTV group.

In terms of the Consultancy Agreements, it was observed that the scope of work of Sanjay Dutt included "complete responsibility and accountability for the Corporate Finance and Strategic Planning function" of the Company including designing and charting implementation strategies to enhance corporate value, while reducing/ optimising financial risks, assist internal teams in areas so as to maximize the company's return to capital, assist and implement investment banking and project evaluation decisions.

Further, his responsibilities included evolving a corporate structure to meet the expansion of the Company; raising funds for existing and new business of the Company; working as part of the internal strategic group and as a liaison for potential partners and allies.

The terms of Consultancy Agreement, made Sanjay Dutt to be responsible and accountable for the Corporate Finance and Strategic Planning function of NDTV and brought him within the principle of a connected person in terms of regulation 2(c)(ii) of the PIT Regulations, 1992, by virtue of his engagement with NDTV in terms of the said Consultancy Agreements.

As per the e-mail correspondences submitted by NDTV, Mr. Sanjay Dutt was a part of the strategic team behind the decisions, which were of price sensitive nature and which were unpublished. From the same, it is also noticed that Sanjay Dutt was directly involved in the discussions pertaining to vital business strategies.

Sanjay Dutt contended that NDTV's complaint is false and baseless, and is filed in retaliation to the proceedings initiated by Quantum Securities Private Limited.

The present complaint filed by NDTV is nothing more than a vindictive and retaliatory measure adopted by NDTV to suppress a whistle blower, he said.