The Hindu : HLL's response to SEBI's charge

Online edition of India's National Newspaper
Thursday, Sep 19, 2002

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HLL's response to SEBI's charge

By Our Staff Correspondent

MUMBAI SEPT. 18. The first case of insider trading that occurred in the country is back in the news. In 1997, the Securities and Exchange Board of India (SEBI) had accused Hindustan Lever Ltd. (HLL) of insider trading in Brooke Bond Lipton India Ltd. (BBLIL) shares prior to BBLIL's merger with HLL.

Summons were issued on Monday last by the metropolitan magistrate's court in Mumbai to HLL and four former directors — S. M. Datta, Keki Dadiseth, A. Lahiri and R. Gopalakrishnan — as also a current director, M. K. Sharma on a criminal writ petition filed by SEBI.

HLL had said SEBI had obtained the order without full disclosure and it would take appropriate legal steps to protect its position. "Aggrieved by the inordinate and abnormal delay in taking cognisance'' of the alleged insider trading charge against HLL by the magistrate, SEBI filed a criminal writ petition in the Bombay High Court on August 14.

According to a SEBI release, the High Court had directed the metropolitan magistrate court in Mumbai to immediately proceed with a prosecution case against HLL filed by SEBI in November 1998.

"However, the magistrate before whom the complaint was filed, had not taken a decision in the matter for the last more than three years. The matter continued to be adjourned for the last three years,'' said the SEBI press release.

It further added that SEBI subsequently filed a criminal writ petition in the Bombay High Court on August 14. "The Bombay High Court allowed the writ petition filed by SEBI and directed the magistrate to proceed in the matter without any further delay.''

In response, HLL, in a release said, "The prosecution launched by SEBI before the additional metropolitan magistrate against HLL and its directors was without bringing to the notice of the court that the appellate authority in its order of July 14, 1998, had quashed the prosecution of HLL and its directors.''

Further, HLL said, the order of the appellate authority had read, "We hold that SEBI was most unjustified in ordering prosecution of the appellants (HLL).''

HLL said this portion of the appellate authority's order was also not stayed by the Bombay High Court in its interim order of September 28, 1998. Further, the company wanted to bring to the notice of the additional chief metropolitan magistrate that SEBI had filed the complaint "in utter disregard'' of the appellate authority's order.

However, SEBI has reportedly refuted HLL's claim that the additional chief metropolitan magistrate, Mumbai, was kept in the dark about certain facts of the case.

HLL had also made an application to him that the summons should not be issued before the company was heard. But in its order of September 3, the Bombay High Court quashed this application on the ground that the company could not be heard before summons were issued.

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