Sebi to review charges against Murugappa chief

Chennai: Market regulator Sebi has said that it will re-investigate insider trading charges against Murugappa Group executive chairman A Vellayan. The regulator had initiated a preliminary examination and charged Vellayan along with three others for insider trading in May last year. The Sebi move came following complaints that unpublished price sensitive information (UPSI) pertaining to the acquisition of the shares of Sabero Organic by Coromandel was being leaked to certain persons, who were acting in concert with the management of Sabero and Coromandel.

Coromandel International, part of the Chennai-based 26,900 crore Murugappa Group, had acquired Sabero in 2011. Sebi had ordered Vellayan and others to return 2.15 crore made on the transaction alleging that he had passed price sensitive information pertaining to the acquisition.

The regulator in its latest order however said that it "may not be just and reasonable" to arrive at a reasonably conclusive finding that it was indeed only Vellayan who had passed the UPSI to his distant relative A R Murugappan, who thereafter passed on the same to Gopalakrishnan C and V Karuppiah without the support of any collateral material. Vellayan's grandfather happens to be the brother of Murugappan's mother; and Murugappan is Karuppiah's father-in-law.

The Murugappa Group said in a statement that its executive chairman "has been vindicated" by the order for re-investigation. Sebi had charged Vellayan and others based on the analysis of trading patterns between May and June 2011. The Sabero scrip soared from 58 on May 13, 2011 to 130 on June 14, 2011. The regulator identified Gopalkrishanan C, Karuppiah HUF (hindu undivided family) and a few others based on their trading .

"On the basis of the findings of the investigation it is difficult to arrive at a conclusion as to who exactly passed the information to Murugappan and thereby to Gopalakrishnan and Karuppiah," the regulator said.

"As many as sixty-nine persons/entities had access to the UPSI during the investigation period. In this maze of facts, it is not possible to conclusively determine from where the information has flowed to the persons/entities who had traded and benefited," SEBI said in its 41-page order.

"It is however, observed that the investigation has not adduced any supporting evidence," the regulator stated.

Vellayan had stepped aside from chairmanship of the group in May last year pending an "internal review" to look into the allegations made by Sebi which he said "had been made without a hearing, and on a prima facie basis."

He was back at the helm of the Murugappa Group after the Murugappa Corporate Board (MCB)requested him to resume chairmanship of the group board in October last year "after an assessment of the status of the ongoing proceedings against alleged insider trading and after considering expert legal advice of senior counsel."