Regulator drops insider trading charges against Dynamatic CEO

After having imposed a ~3.83crore penalty on Udayant Malhoutra, the majority owner and chief executive of aerospace manufacturer Dynamatic Technologies (DTL), on charges of insider trading, Sebi has dropped the case as the Securities and Appellate Tribunal (SAT), and then the Supreme Court, found no wrongdoing.

The markets regulator had charged Malhoutra with trading in the company’s shares in 2016 while in possession of unpublished price sensitive information (UPSI). Malhoutra appealed to the SAT, which exonerated him.

The appellate tribunal ruled that Sebi had passed exparte orders, normally done in situations of extreme urgency, without giving Malhoutra a hearing or the opportunity to defend himself.

The SAT ruled: “In the instant case, we do not find any case of extreme urgency which warranted the respondent (Sebi) to pass an ‘ex-parte’ interim order only on arriving at the primafacie case that the appellant was an insider.”

When the regulator appealed against the SAT’S order in the Supreme Court (SC), the apex court upheld the tribunal’s decision.

After the SC decision, Sebi’s whole-time member Ananta Barua exonerated Malhoutra and held that Sebi had not been able to establish insider trading.

Barua held that Malhoutra sold 51,000 shares, not for profit but to comply with a loan agreement dated June 29, 2016 between DTL and its banks. On that day Malhoutra owned 51.1 per cent of DTL, and the 51,000 shares he sold constituted just 0.8 per cent of his holding.