The Code of Corporate Disclosure Practices provided within schedule II of the SEBI (Prohibition of Insider Trading) Regulations, 1992, provides various requirements that are to be adhered to by all listed companies. One such requirement is that all listed companies must disseminate all price sensitive information to stock exchanges on a continuous and immediate basis. In order to decide what information can be termed as price sensitive, it must be considered whether the information is directly or indirectly related to the company and whether the publication of the information is likely to materially affect the price of the securities of the company.

In a recent order in the matter of MAN Industries, an Adjudicating Officer decided that delays in disclosing certain price sensitive information warranted a penalty of Rs. 25 lakh. The company had bagged two major orders that would earn it revenue in the range of a 100 million Euros each. However, the stock exchanges were informed of one of these orders nearly 60 days after the contract was signed, while the other was 7 days late.

The company had contended that there was a strong likelihood of the order being amended and might have required additional confirmations. They also argued that they were waiting for the payment of the advance in order to ensure the commitment of the clients. In their view, disclosure of the information without being certain of the finality of the contract would be premature, misleading and result in greater harm to investors.

By taking note of the clause within the contract clearly stating that the contract shall come into effect and become binding on the parties upon it being duly signed, the adjudicating officer held that the signing of the contract would constitute reasonable crystallization of the order and warrant dissemination of the information. Payment of advance is merely a discharge of an obligation arising out of a valid and binding contract and waiting for the same is not an acceptable defence. Additionally, any future amendments would simply require a separate disclosure under the same disclosure requirements.