The dispute concerned possession of confidential loss information
The respondents sold substantial holdings during the period when information about the company’s quarterly losses had not been published. The Securities Appellate Tribunal had set aside the Whole Time Member’s order. Before the Supreme Court, the respondents relied on the corporate purpose of the sales, including efforts to prevent financial distress, and their claim not to have gained profits. The Court examined those arguments under the actual regulatory text. (Paragraphs 1–4, 9–11 and 16.)
A good use of the proceeds is not the statutory defence
The note to Regulation 4(1) treats trading while in possession of UPSI as presumptively motivated by that knowledge, subject to the opportunity to demonstrate innocence. It makes the reason for trading and use of the proceeds irrelevant in the stated sense. The Court nevertheless recognised that the listed defences are not exhaustive: other circumstances of a similar nature may qualify. It did not transform a rebuttable framework into an absolute rule with no possible defence. (Paragraphs 9–13.)
Why the earlier Abhijit Rajan decision did not control
The respondents relied on an earlier case involving sales connected with corporate restructuring. The Court distinguished the predecessor 1992 Regulations, which did not contain the same express note found in the 2015 regime, as well as the different price-sensitive context. Similar corporate motives did not eliminate the need to identify which regulatory version governed the trades. This temporal distinction is central to the reasoning. (Paragraphs 14–15.)
The financial directions need separate reporting
The Court restored the disgorgement order concerning approximately ₹1.38 crore in avoided losses, treating loss avoidance as economically significant even without a conventional realised trading profit. It upheld the relevant compliance-penalty finding, but reduced Respondent No. 1’s Section 15G penalty from ₹25 lakh to ₹10 lakh. Paragraph 20 allowed three months from receipt of the judgment to pay the reduced penalty if it had not already been paid. Liability, disgorgement and the individual penalty are separate elements of the result and should not be combined into one unexplained figure. (Paragraphs 16–18 and 20.)
A question this judgment answers
Did the Court say the enumerated Regulation 4 defences are exhaustive?
No. It treated the word including as indicating that the listed defences are not exhaustive, while holding that the corporate-purpose argument did not establish a defence here. (Paragraph 13.)
Lawyers and appearances recorded by SCR
The following retains the source’s grouping and designations. It does not establish each lawyer’s role in every connected proceeding.
- Advs. for the Appellant(s):
- Pratap Venugopal, Navin Pahwa, Sr. Advs. Amarjit Singh Bedi, Ms. Surekha Raman, Shreyash Kumar, Siddharth Nair, Harshit Singh, Yashwant Sanjebam, M/s K J John And Co., Abhishek Singh, M/s K Ashar & Co.
- Advs. for the Respondent(s):
- Dr. Aditya Sondhi, Sr. Adv., Ravichandra Hegde, Ms. Malvika Kapila, Ms. Mitravinda Chunduru, Ms. Harbani Shinh, Ms. Pallavi Pratap, Aadhar Nautiyal, Ms. Meghna Rao, Dipansh Mishra, Ms. Shivangi Kohli, Ms. Ryna Karani, Ms. Prachi Raval, Rijuk Sarkar.
Procedural origin recorded by SCR
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4905 of 2022
From the Judgment and Order dated 19.04.2022 of the Securities Appellate Tribunal, Mumbai in AN No. 536 of 2021