SECURITIES AND EXCHANGE BOARD OF versus UDAYANT MALHOUTRA

Citation: [2020] 14 S.C.R. 327 · Decided: 18-11-2020 · Supreme Court of India · Bench: D.Y. CHANDRACHUD, INDU MALHOTRA, INDIRA BANERJEE · Disposal: Disposed off
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Judgment (excerpt)

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   [2020] 14 S.C.R. 327
SECURITIES AND EXCHANGE BOARD OF INDIA
v.
UDAYANT MALHOUTRA
(Civil Appeal Nos. 2981-2982 of 2020)
NOVEMBER 18, 2020
[DR. DHANANJAYA Y CHANDRACHUD,
INDU MALHOTRA AND INDIRA BANERJEE, JJ.]
Securities and Exchange Board of India Act 1992 – s.19 r/w.
ss.11(1), 11(4)(d), 11(4A), 11(5) and 11B – SEBI (Prohibition of
Insider Trading) Regulations 2015 – regn.10 – It was alleged that
respondent-CEO and Managing Director of the company had sold
51,000 shares of the company on 24.10.2016 having inside
knowledge of price sensitive information, namely, the unaudited
financial results of the quarter ending on 30.09.2016 – Later, the
price of the scrips of the company sustained a drastic reduction –
The allegation against the respondent was that being in possession
of price sensitive information, he had sold the shares and had, thus,
made a notional gain or averted a notional loss – The matter became
subject of investigation in 2017 and the respondent was called for
information on 28.11.2019 – The Whole Time Member passed an
ex-parte order on 15.06.2020 – However, the Tribunal held that it
does not find any case of extreme urgency which warranted to pass
an ex-parte interim order only on arriving at the prima-facie case
that the respondent was an insider as defined in the Regulations,
2015 without considering the balance of convenience or irreparable
injury – Held: On the facts, the Tribunal was correct in coming to
the conclusion that since the investigation was pending since 2017
and information had been supplied on 28.11.2019, there was no
urgency for passing an ex-parte interim order of the nature that
was issued by the Whole Time Member – It was, in this background,
that the Tribunal, while affirming the power of SEBI to pass an ex
parte interim order in appropriate cases, observed that this should
be exercised “only in extreme urgent matters” – Thus, there is no
reason to take a view at variance with the conclusion of the Tribunal
on the facts of the case – However, the interpretation which has
been placed by the Tribunal on the powers of SEBI shall not be
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SUPREME COURT REPORTS
[2020] 14 S.C.R.
cited as a precedent in any other case – Accordingly, appeals are
disposed of.
North End Foods Marketing Pvt Ltd v Securities and
Exchange Board of India (Appeal 80 of 2019 decided
on 12.03.2019 by Securities Appellate Tribunal) –
referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 2981-
82 of 2020
From the Judgment and Order dated 27.06.2020 of the Securities
Appellate Tribunal, Mumbai in Appeal No. 145 of 2020
Tushar Mehta, SG, Mahfooz A Nazki, Avinash Tripathi, Advs. for
the Appellant.
Amit Sibal, Sr. Adv., Sonal Jain, Ishkaran Singh, Advs. for the
Respondent.
The following Judgment of the Court was delivered:
JUDGMENT
1. These statutory appeals have been instituted by the Securities
and Exchange Board of India1 under Section 15Z of the Securities and
Exchange Board of India Act 19922. The appeals arise out of the orders
passed by the Securities Appellate Tribunal3 on 27 June 2020 and 23 July
2020. The Tribunal set aside an interim order dated 15 June 2020 passed
by the Whole Time Member of SEBI under Section 19 read with Sections
11(1), 11(4)(d), 11(4A), 11(5) and 11B of the SEBI Act read with
Regulation 10 of the SEBI (Prohibition of Insider Trading) Regulations
2015.
2. By the interim order, the Whole Time Member quantified an
amount of  Rs 3,83,16,230.73, being the notional loss sought to be avoided
on account of trades carried out by the respondent in the scrips of
Dynamatic Technologies Ltd over unpublished price sensitive information.
The respondent was directed by the Whole Time Member to credit the
amount into an Escrow Account.
3. For the purpose of the present appeals, the facts lie in a narrow
compass. The respondent is the Chief Executive Officer and Managing
1 “SEBI”
2 “SEBI Act”
3 “Tribunal”
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Director of the Company in question. It was alleged that he had sold
51,000 shares of the Company on 24 October 2016 having inside
knowledge of price sensitive information, namely, the unaudited financial
results of the quarter ending on 30 September 2016. It was alleged that
the financial results were approved by the Board of Directors on 11
November 2016, upon which the price of the scrips of the Company
sustained a drastic reduction. The allegation against the respondent was
that being in possession of price sensitive information a
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