Securities and Exchange Board of India has prohibited Dilip Pendse, former managing director of Tata Finance Ltd, from dealing in securities and associating with the market for six months for his involvement in insider trading.
Pendse has violated Sebi's Prohibition of Insider Trading Regulations and "in the interest of investors and protection of the securities market, it is imperative to prohibit Pendse from dealing in securities," Sebi whole-time member T M Nagarajan said in his order.
The Tata Finance Fiasco: Complete Coverage
"Therefore, in exercise of the power under section 11B of Sebi act and provision 11 of insider trading regulation, I direct Pendse should dissociate himself from the securities market and he should not deal in securities henceforth for a six months," Nagarajan said in his order signed on December 22.
Sebi was currently conducting a probe against Pendse for his alleged involvement in fraudulent and unfair trade practices and this order does not preclude any penal action that may be warranted, based on the outcome of the pending investigations by the market regulator, it added.
Pendse was involved in unlawful activity of insider trading by J E Talaulicar, non-executive director on TFL board, in the finance company shares, the order said.
Pendse was found to have assisted Talaulicar and his family in offloading shares to a broker in a non-transparent off-market deal at price higher than the market price, it said
Pendse remanded to police custody
Pendse who was arrested by the Delhi police on Tuesday was produced in a city court and remanded to custody for seven days.
According to a complaint lodged with the police, Pendse entered into a contract with stockbroker Rajinder Jhunjhunwalla for sale and purchase of 85,000 shares of Global Tele Systems, when he was director of TFL associate Inshallah Investment Ltd.
These contracts were "principal-to-principal" meaning Jhunjhunwalla was personally the seller and IIL the purchaser.
As per stock exchange rules, such a contract is known as off-market contract, and the broker is legally bound to inform the stock exchange within 48 hours of transacting it. But this was not followed in this case, the complaint alleged.
Pendse, it said, entered into the contracts knowing fully well that they could not be carried forward and they had no means to pay for the shares worth crores of rupees.
A Sebi probe had also revealed that Jhunjhunwala had indulged in ante dating the contract note and bills and falsifying accounts.
Police have already arrested Jhujhunwalla over the charges.
This is the second time that Pendse is being arrested for alleged misappropriations in the group company. Earlier, he was arrested in February last over charges of issuing cheques worth Rs 2 crore (Rs 20 million) to the brokers for paying personal transactions of a former TFL director.
