BALRAM GARG versus SECURITIES AND EXCHANGE BOARD OF INDIA

Citation: [2022] 4 S.C.R. 888 · Decided: 19-04-2022 · Supreme Court of India · Bench: VINEET SARAN · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2022] 4 S.C.R.
[2022] 4 S.C.R. 888
888
 BALRAM GARG
v.
 SECURITIES AND EXCHANGE BOARD OF INDIA
(Civil Appeal No. 7054 OF 2021)
APRIL 19, 2022
[VINEET SARAN AND ANIRUDDHA BOSE, JJ.]
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Trading – On receipt of Unpublished Price Sensitive Information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
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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 ter

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