NDLI: Balram Garg Vs. Securities and Exchange Board of India

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	SEBI (Prevention of Insider Trading Regulations) 2015 – Regulation 2(1)(d) and 2(1)(f)
Content Type	Text
Resource Type	Law Judgement
Jurisdiction	India
Case(s) Referred	Referred Case 0 Referred Case 1 Referred Case 2 Referred Case 3 Referred Case 4 Referred Case 5 Referred Case 6 Referred Case 7
Case Type	Appeal
Court	Supreme Court of India
Disposal Nature	Appeal Allowed
Headnote	SEBI (Prevention of Insider Trading Regulations), 2015 – Regulation 2(1)(d) and 2(1)(f) – Securities and Exchange Board of India Act, 1992 – ss.11(2)(g), 11(4), 12A(c), 15G and 15Z – Insider Trading – On receipt of Unpublished Price Sensitive Information (UPSI) – “Connected persons” and “immediate relatives” – Respondent/SEBI alleging that P.C. Gupta and his brother appellant ‘B’, who were respectively the Chairman and Managing Director of PCJ, a public limited company, were inter alia “connected person” in terms of Regulation 2(1)(d)(i) and appellants in C.A. No.7590/ 2021, traded on basis of UPSI received by them on account of their alleged proximity to P.C. Gupta and appellant ‘B’ in view of their close family relationship – Claim of estrangement by appellants in C.A. No.7590 of 2021 – Rejected by Whole Time Member (WTM) of SEBI and also the Securities Appellate Tribunal (SAT) – Held: WTM and SAT wrongly rejected the claim of estrangement without appreciating the facts and evidence produced before them – The records and facts adequately establish that the there was a breakdown of ties between the parties, both at personal and professional level and that the said estrangement happened much prior to the two UPSI – Appellants are neither “connected persons” under regulations 2(1)(d) nor “immediate relatives” under 2(1)(f) – Even assuming that the family arrangements did not result in complete estrangement of social relations between the parties, the SAT could not, by virtue of this very fact, discharge SEBI of the onus of proof placed on them to prove that Appellants were in possession of UPSI – SEBI failed to place on record any material to prove that appellants in C.A. No.7590/2021 were “connected persons” to appellant ‘B’ as required by Regulation 2(1)(d)(ii)(a) read with Regulation 2(1)(f) as none of the appellants in C.A. No.7590/2021 were financially dependent on appellant ‘B’ or even alleged to have consulted him in any decision related to trading in securities – Appellants in C.A. No.7590 of 2021 were not “immediate relatives” and had nothing to do with appellant ‘B’ in any decision making process relating to securities or even otherwise. SEBI (Prevention of Insider Trading Regulations), 2015 – Regulation 2(1)(g) and 3 – Securities and Exchange Board of India Act, 1992 – ss.11(2)(g), 11(4), 12A(c), 15G and 15Z – Insider Trading – On receipt of Unpublished Price Sensitive Information (UPSI) – Circumstantial evidence (trading pattern and timing of trading) – Relevance of – Respondent/SEBI alleging that P.C. Gupta and his brother ‘B’, who were respectively the Chairman and Managing Director of PCJ, a public limited company, were inter alia “insider” under Regulation 2(1)(g) and that appellants in C.A. No.7590/2021, traded on basis of UPSI received by them on account of their alleged proximity to P.C. Gupta and ‘B’ in view of close family relationship – Whether appellants in C.A. No.7590 of 2021, could be held to be “insiders” in terms of regulation 2(1)(g)(ii) on basis of circumstantial evidence (trading pattern and timing of trading) – Held: Regulation 3, which deals with communication of UPSI, does not create a deeming fiction in law – Hence, it is only through producing cogent materials (letters, emails, witnesses etc.) that communication of UPSI could be proved and not by deeming the communication to have happened owing to the alleged proximity between the parties – In the present case, the foundational facts were not proved which could raise the alleged presumption – Trading pattern of appellants in C.A. No.7590 of 2021 cannot be the circumstantial evidence to prove the communication of UPSI to them by appellant ‘B’ – There was no correlation between the UPSI and the sale of shares undertaken by the appellants in C.A. No.7590 of 2021 – Decisions of selling the shares and the timings thereof were purely a personal and commercial decision undertaken by them and nothing more can be read into those decisions – In absence of any material available on record to show frequent communication between the parties, there could not have been a presumption of communication of UPSI by appellant ‘B’ – SAT erred in holding the appellants in C.A. No.7590 of 2021 to be “insiders” in terms of regulation 2(1)(g)(ii) on basis of their trading pattern and their timing of trading (circumstantial evidence). Shares and Securities – Securities Appellate Tribunal (SAT) – On facts, SAT was exercising jurisdiction of a First Appellate Court and was bound to independently assess the evidence and material on record, which it evidently failed to do – The SAT order was a mere repetition of facts stated by WTM and suffered from non application of mind – Appeal – First Appellate Court – Jurisdiction.
Judge	Hon'ble Mr. Justice Vineet Saran
Neutral Citation	2022 INSC 442
Petitioner	Balram Garg
Respondent	Securities And Exchange Board Of India
SCR	[2022] 4 S.C.R. 888
Judgement Date	2022-04-19
Case Number	7054

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