The Case of insider trading (HLL-BBLIL Merger)

Case Studies | Case Study in Business, Management, Operations, Strategy, Case Study

ICMR HOME | Case Studies Collection

Case Details:

Case Code : FINC014
Case Length : 8 Pages
Period : 1995 - 1998
Pub. Date : 2002
Teaching Note : Available
Organization : HLL, BBLIL, SEBI, UTI
Industry : Diversified
Countries : India

To download The Case of insider trading (HLL-BBLIL Merger) case study (Case Code: FINC014) click on the button below, and select the case from the list of available cases:


For delivery in electronic format: Rs. 200;
For delivery through courier (within India): Rs. 200 + Rs. 25 for Shipping & Handling Charges

Finance Case Studies
Short Case Studies
View Detailed Pricing Info
How To Order This Case
Business Case Studies
Case Studies by Area
Case Studies by Industry
Case Studies by Company

Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

<< Previous

Excerpts Contd...

Did HLL Gain Financially?

HLL defended itself by pointing out that SEBI had to establish the financial benefit from the transaction in order to prove an insider trading charge. It pointed out that though establishing "financial benefit" was not explicit in the law, it was implied, because the act said that it should be taken into account when levying penalties. Said Justice Bhagwati, "though the SEBI regulations did not contain any specific requirement of the presence of any element of making profit or avoiding loss, this factor is inherent in the offence of insider trading"...

Prosecution Not Justifiable

Round two of the battle between SEBI and HLL took place under the aegis of the Appellate Authority of the Finance Ministry.

In response to the SEBI's charge, HLL appealed to the Appellate Authority pleading that it be absolved of the charges of insider trading. UTI later filed an appeal with the Appellate authority, claiming a higher compensation of Rs. 75.2 million (7.52 crore).

It pleaded that it had to incur a notional loss as it was not aware that a merger of the two Unilever group companies was on the cards...

HLL Not Guilty-Proposal 'Generally Known'

In support of its ruling, the Appellate Authority cited press reports that indicated "prior market knowledge of the merger." However, by its own admission, there were only a few reports "prior to the actual purchase (of shares from UTI)." The Authority had cited 21 news reports to support the contention that the prospect of a merger between HLL and BBLIL was widely known. In its judgement, the Appellate Authority said that under Regulation 11B, SEBI was not capable of initiating investigations and then taking recourse to powers under the Act for awarding compensation without passing an order under the above mentioned regulation...

Time to Introspect

The charge against HLL had brought to the fore the debate over SEBI's role as a watchdog of the Indian Capital market and its ability to control financial crimes such as insider trading. It also highlighted the inability of the legal machinery to handle such cases.

Though SEBI issued regulations governing this area in 1992, there had been no proven case of insider trading since then. But the question here was: did the market regulator have any system in place to monitor such instances and take suo moto action as provided in the Regulations?

The answer to the question seemed to be 'no'...


Case Studies Links:- Case Studies, Short Case Studies, Simplified Case Studies.

Other Case Studies:- Multimedia Case Studies, Cases in Other Languages.

Business Reports Link:- Business Reports.

Books:- Textbooks, Work Books, Case Study Volumes.