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Rakesh Agarwal v SEBI
The rapidly advancing Indian Securities market needed a more comprehensive legislation to regulate the practice of Insider Trading, thus resulting in the formulation of the SEBI (Insider Trading) Regulations in the year 1992, which were amended in the year 2002 after the discrepancies observed in the 1992 regulations in the cases like Hindustan Levers Ltd. vs. SEBI, Rakesh Agarwal vs. SEBI, etc. to remove the lacunae existing in the Regulations of 1992.
One of the most famous cases highlighting the vulnerability of the SEBI’s 1992 regulations in this regard is Rakesh Agarwal vs. SEBI. In this famous case, Rakesh Agarwal, the Managing Director of ABS Industries Ltd. (ABS), was involved in negotiations with Bayer A.G regarding their intentions to takeover ABS. Therefore, he had access to this unpublished price sensitive information.
It was alleged by SEBI that prior to the announcement of the acquisition, Rakesh Agarwal, through his brother in law, Mr. I.P. Kedia had purchased shares of ABS from the market and tendered the said shares in the open offer made by Bayer thereby making a substantial profit.
