SEBI penalised Lever but the company appealed against the order to the Finance Ministry. The ministry struck down the SEBI order of prosecution against five directors of Lever and payment of compensation of Rs 3.04 crore to the Unit Trust of India (UTI) in the alleged insider trading case.

The appellate authority comprising Union Finance Secretary M S Ahluwalia and Special Secretary (Banking) upheld HLL's view that the news of the proposed merger was generally known as it had been widely discussed and reported in the media. The five directors absolved by the MoF are HLL chairman K B Dadiseth, former chairman S M Datta, director (personnel & corporate strategy) A Lahiri, director (legal) M K Sharma and formervice- chairman R Gopalakrishnan.

Vindicating HLL's stand, the ministry concluded that there was no reason to prosecute the company and its directors. The order was delivered after hearing both parties at length. HLL appealed to the appellate authority after SEBI ordered criminal prosecution against HLL on charges of insider trading. Insider trading, which involves trading in shares after possessing sensitive and privileged information, is banned under the Indian rules.

Holding that SEBI did not have the powers to grant compensation to any party, the appellate authority has stated that UTI, which sold the BBLIL shares to HLL prior to the merger, could not but have known about the impending merger given the wide reporting in the media.

``UTI had not expressed any grievance about the transaction for two years and had, in fact, sold more BBLIL shares to HLL in December 1996. It made a grievance only in April 1998 after the SEBI order was issued and HLL had appealed to the ministry,'' the MoF order said.While SEBI had pegged the compensatory amount to UTI at Rs 3.04 crore, UTI later demanded a hike in this amount.

The order further stated, ``Since the possibility of merger appears to have been generally speculated about and was probably already discounted by the market this information is not likely to have significantly impacted the price at which the transaction was concluded with UTI in March 1996. This is further corroborated by the fact that UTI continued to sell BBLIL shares in the market after the merger at prices close to the price at which they had sold shares to HLL in March 1996.''

Free telecom

MTNL can now start cellular operations and private Internet players can get down to business. These two major developments occurred as a result of a crucial order by the Delhi High Court which also whittled down the powers of the Telecom Regulatory Authority of India (TRAI). The ruling restores the powers of the Department of Telecommunications (DoT) vis-a-vis the TRAI which had been arguingthat the DoT could not grant/alter any telecom licences without the TRAI's approval. Private cellular operators had opposed MTNL's entry into this sector and the TRAI had supported this. TRAI was also upset that the Government did not seek its recommendations before opening the Internet service to private players.

While delivering her ruling, Justice Usha Mehra said, ``The authority fell in error in concluding that the power of the Government to grant or amend the licence is subject to the recommendations of the TRAI or that these recommendations are mandatory in nature.''