The Securities and Exchange Board of India (SEBI) has closed insider trading proceedings against Raj Kumar Agarwal in connection with trading in RHI Magnesita India shares, ruling that the evidence available was insufficient to prove that he possessed unpublished price sensitive information (UPSI). The market regulator disposed of the case without imposing any monetary penalty, stating that the chain of circumstantial evidence presented during the investigation was incomplete.

The case was related to RHI Magnesita India’s proposed acquisition of Dalmia OCL through a share-swap transaction valued at around Rs 1,708 crore, which was announced on November 19, 2022. SEBI had alleged that Agarwal traded in RHI shares while having access to confidential information about the deal. The regulator claimed that he purchased 1.45 lakh shares worth approximately Rs 8.62 crore between November 11 and 15, 2022, and later sold them after the announcement, allegedly earning unlawful gains of around Rs 1.59 crore.

SEBI’s investigation largely relied on circumstantial evidence, including communication between Agarwal and RHI Managing Director Parmod Sagar during the period when the acquisition details were not public. Investigators pointed to phone calls, SMS exchanges, and VOIP communication between the two individuals. However, the adjudicating officer noted that the interactions had a reasonable business explanation, as RHI and Agarwal were already connected through RHI’s acquisition of Hi-Tech Chemicals’ refractory business for Rs 621 crore.

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The regulator had also highlighted a November 8, 2022 VOIP call between Agarwal and Sagar, claiming it may have been the point where confidential information about the Dalmia OCL deal was shared. However, SEBI’s order noted that there was no recording, transcript, message, email, or witness statement proving that UPSI was discussed during the call. The officer observed that assuming confidential information was shared would require multiple unsupported assumptions.

SEBI also examined Agarwal’s trading behaviour, including his sale of Tata Steel shares before investing in RHI stock. The regulator argued that the timing of these transactions indicated prior knowledge of the acquisition. However, the adjudicating officer found that Agarwal, who had significant experience in the refractory industry, could have made the investment decision based on publicly available information and his understanding of RHI’s business prospects.

The final order stated that insider trading allegations can be established through circumstantial evidence, but the evidence must create a complete and convincing chain proving possession of UPSI. In Agarwal’s case, SEBI found that the available material did not establish such a connection, and the trading pattern alone could not prove wrongdoing. As a result, the insider trading proceedings were closed without any penalty.

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