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Informist, Tuesday, Aug. 11, 2026

 

NEW DELHI – The Supreme Court Tuesday held that a person holding unpublished price-sensitive information about a company and trading in its shares at that time is sufficient to conclude that they had conducted insider trading, irrespective of whether the person had made a profit or loss. In view of Regulation 4(1) of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, the purposes for which the proceeds are employed is an irrelevant consideration, the court said.

 

The apex court set aside a Securities Appellate Tribunal's order that had exonerated Tara Jewels Ltd. Chairman and Managing Director Rajeev Vasant Sheth and his daughters, who were also promoters of the company, from insider trading charges. The court said it was not in dispute that Sheth and his daughters were in possession of unpublished price-sensitive information and they had sold off large portions or the entirety of their shareholding in the company while in possession of such information.

 

It is clearly established that Sheth and his daughters had engaged in insider trading and, as such, had avoided approximately INR 13.8 million in losses. In view of the explanation given in Section 11B of the Securities and Exchange Board of India Act, 1992, the disgorgement order issued by the whole-time member of the market regulator cannot be faulted, it said. Further, the penalty imposed on the respondents in view of violation of Clause 6 of the Minimum Standards for Code of Conduct to Regulate, Monitor, and Report Trading by Insiders read with Regulation 9(1) of the 2015 Regulations is also justified, the court said. However, the court said the penalty of INR 2.5 million imposed under section 15G of the SEBI Act on Sheth may be excessive, and reduced it to INR 1 million, the same as the minimum penalty imposed on his daughters.

 

The court noted that the Securities Appellate Tribunal had recognised a defence to insider trading, which was a legitimate corporate purpose, based on an earlier appellate tribunal ruling, which was based on 1992 insider trading regulations. However, the appellate tribunal should not have taken this stand in view of the new 2015 regulations.

 

Tara Jewels was listed on BSE and the National Stock Exchange. It entered the liquidation process in 2019 by an order of the National Company Law Tribunal. The company had suffered losses of INR 1.67 billion for the quarter ended September 2017, whereas in the previous quarter, it had reported a net loss of INR 66.2 million. For the same period, the net sales of the company fell around 69%. 

 

During the unpublished price-sensitive information period from Oct. 2, 2017, to Nov. 29, 2017, Sheth sold 3.01 million shares owned by him, or about 12.56% of the company's total equity, and a further 2.98 million in subsequent transactions. His daughter sold off their entire holding of 114,440 shares each. Consequently, a cumulative loss of approximately INR 13.8 million was avoided. Thereafter, SEBI penalised the respondents. SEBI's order was overturned by the appellate tribunal. Challenging the appellate tribunal's order, SEBI had moved the apex court.  End

 

Reported by Surya Tripathi

Edited by Shubhayan Bhattacharya

 

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