Varun Beverages’ Jaipuria settles an insider trading case with Sebi; Country Rs 56 lakh

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Varun Beverages Chairman Ravi Kant Jaipuria has settled with financial market regulator Sebi a case related to alleged breaches of insider trading rules after paying nearly Rs 56 lakh for settlement fees.

It has been alleged that Jaipuria disclosed price sensitive unpublished information (UPSI) regarding a strategic partnership between Varun Beverages Ltd (VBL) and PepsiCo for the sale and distribution of the larger two-person Tropicana. Based on the information, shares of Varun Beverages, the bottling partner of PepsiCo India, were traded.

The latest order came after Jaipuria approached Sebi to settle the proceedings against him for the alleged breach “without admitting or denying the finding”.

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“This settlement order disposes of the above-noted arbitration proceeding brought against the plaintiff, viz. Ravi Kant Jaipuria void SCN… dated December 21, 2021,” Sebi said in his order adopted on Tuesday.

In its order, the regulator observed that two entities – Spank Management Services and Fenton Investment – traded in the VBL certificates during the UPSI period from December 21, 2017 to January 4, 2018. These two entities, through their directors or owners, were related to Lemon Tree Hotels Ltd of which Jaipuria was also a director.

According to the annual report of Lemon Tree Hotels for the financial year 2017-18, it was observed that Patanjali Govind Keswani was the Chairman and Managing Director of Lemon Tree Hotels. Additionally, Jaipuria was the manager and Arvind Singhania was an independent manager of Lemon Tree Hotels. While analyzing the annual return for the year 2016-17 fulfilled by the Spank at MCA, it was observed that Lemon Tree Hotels was one of the associated companies of Spank.

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Moreover, Jaipuria, Keswani and Singhania knew each other personally. Jaipuria and Keswani – from December 27, 2017 to January 2, 2018 – were staying at the same hotel in Bangkok. During the same period, Singhania was also staying in Bangkok at a nearby hotel.

It was noted that Fenton (Singhania) and Spank (Keswani) placed an order to buy shares of VBL and sold all such shares immediately after an announcement relating to the strategic partnership was made public.

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The orders were placed by Fenton (Singhania) and Spank (Keswani) on December 28, 2017 and January 2, 2018 respectively, when all three were in Bangkok and Jaipuria was in the possession of UPSI. It was therefore alleged that Jaipuria, being an insider and in possession of UPSI, communicated UPSI to Singhania (Fenton) and Keswani (Spank) and violated insider trading rules.

In this regard, a show cause notice (SCN) was issued to Jaipuria in December 2021. Pending the arbitration proceedings, he offered to settle the matter.

Following this, Sebi recommended that the arbitration proceeding against the claimants could be settled upon payment of Rs 55.90 lakh for the settlement amount and hence, Jaipuria remitted the amount and settled the matter with the capital market regulator.

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