### Hindustan Lever Ltd. v.

SEBI

**Facts:**
Hindustan Lever Limited (HLL) purchased 800,000 shares of Brooke Bond Lipton India
Limited (BBLIL) from the Unit Trust of India (UTI) on March 25, 1996. This transaction
occurred just two weeks before a public announcement of the merger between HLL and
BBLIL. SEBI investigated this purchase and concluded that HLL, as an insider under the
1992 Insider Trading Regulations, had access to unpublished price-sensitive information
(UPSI) regarding the merger.

**Issues:**
1. Whether HLL could be considered an insider.
2. Whether the information HLL had was considered UPSI.

**Judgment:**
The Securities Appellate Authority upheld SEBI's decision that HLL was an insider since
both HLL and BBLIL were under the same parent company, Unilever, and hence had prior
knowledge of the merger. The authority also ruled that the merger information was price-
sensitive but noted that it was not unpublished because the market had speculative reports
about the merger. Nonetheless, SEBI's decision was primarily based on the potential price
impact of such information, which is significant even for mergers between two strong
companies due to synergistic effects【6†source】【7†source】【9†source】.

**Consequences:**
The decision led to amendments in the SEBI (Insider Trading) Regulations. The term
"unpublished" was clarified to mean information not released by the company or its agents.
Speculative reports in media were excluded from being considered published information.
SEBI also broadened the definition of "price-sensitive information" to include any
information related to mergers, amalgamations, or takeovers, regardless of the actual market
impact【7†source】【9†source】.

The case highlighted the need for clear regulations regarding insider trading and influenced
subsequent changes to insider trading laws in India, ensuring stricter compliance and more
precise definitions of key terms such as UPSI【8†source】.

2) ### Rakesh Agarwal v. SEBI

**Facts:**
Rakesh Agarwal, the Managing Director of ABS Industries, was involved in negotiating a
deal with Bayer AG for the acquisition of a controlling stake in ABS. During these
negotiations, Agarwal had access to unpublished price-sensitive information (UPSI)
regarding the impending takeover. Before the public announcement of this acquisition,
Agarwal arranged for his brother-in-law to purchase 182,500 shares of ABS, funded by
Agarwal himself【16†source】【17†source】.

**Issues:**
1. Whether Rakesh Agarwal engaged in insider trading by using UPSI for personal gain.
2. Whether the actions taken by Agarwal constituted a violation of SEBI (Prohibition of
Insider Trading) Regulations, 1992.

**Judgment:**
The Securities and Exchange Board of India (SEBI) found Agarwal guilty of insider trading
and imposed penalties. However, on appeal, the Securities Appellate Tribunal (SAT)
overturned SEBI's decision. The SAT reasoned that Agarwal's actions were not driven by a
desire to profit personally but were meant to ensure the survival and benefit of ABS
Industries. The tribunal emphasized that Agarwal's intention was to secure the company's
future, which he believed was in the best interest of the stakeholders【16†source】
【17†source】.

The SAT's decision underscored that while Agarwal had indeed accessed UPSI, his motives
were corporate rather than personal gain. This distinction was pivotal in the SAT's ruling,
leading to the reversal of SEBI's order【15†source】【17†source】.

**Consequences:**
This case highlighted the complexities surrounding insider trading regulations, particularly
regarding the intent and use of UPSI. It led to discussions on the need for clearer definitions
and more robust enforcement mechanisms within the regulatory framework to address such
cases effectively【16†source】【17†source】.

3) The primary insider trading regulations in India are:

1. **SEBI (Prohibition of Insider Trading) Regulations, 1992**: The initial framework for
preventing insider trading in the Indian securities market.

2. **SEBI (Prohibition of Insider Trading) Regulations, 2015**: An updated and

comprehensive regulation replacing the 1992 regulations, aimed at refining the definitions
and expanding the scope of insider trading provisions.

### Key Features of the 2015 Regulations:

- **Unpublished Price Sensitive Information (UPSI)**: Defined to include information
related to financial results, dividends, change in capital structure, mergers, demergers,
acquisitions, delistings, disposals, and material expansion of business.
- **Designated Persons**: Identifies specific individuals and their immediate relatives who
are likely to possess UPSI.
- **Disclosure Requirements**: Mandates disclosures of trading by insiders and connected
persons.
- **Code of Fair Disclosure**: Companies must formulate and publish a code of practices
and procedures for fair disclosure of UPSI.

### Amendments and Updates:

- **SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2018**: Introduced
stricter penalties and increased transparency requirements.
- **SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2019**: Further
tightened the rules around disclosure and introduced pre-clearance requirements for trading
by designated persons.

These regulations are enforced by the Securities and Exchange Board of India (SEBI) to
ensure fair practices in the securities market and protect investors' interests.

For more detailed information, you can refer to SEBI’s official website: [SEBI Insider
Trading Regulations](https://www.sebi.gov.in/legal/regulations/jan-2015/sebi-prohibition-of-
insider-trading-regulations-2015-last-amended-on-january-21-2019-_34610.html).