Insider trading presumption is rebuttable where regular market trading and timing do not show use of unpublished price sensitive information.

Insider trading liability under the SEBI insider trading framework arises only where an insider deals in securities on the basis of unpublished price sensitive information, and any presumption from connected or deemed connected status remains rebuttable. The appellant rebutted that presumption by showing that her husband had ceased to be a promoter long before the relevant period, that she traded regularly in the shares in the ordinary course, and that her purchases and sales were not patterned around the relevant announcements. On those facts, the trading did not indicate use of unpublished information relating to financial results, dividend, or bonus issue, so the insider trading charge was not established and the adverse order could not be sustained.

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Issues: Whether the appellant was guilty of insider trading for dealing in the company's securities while in possession of unpublished price sensitive information.

Analysis: Liability under regulation 3 arises when an insider deals in securities on the basis of unpublished price sensitive information. A person may be treated as connected or deemed connected, and trades by such a person may raise a presumption of insider trading, but that presumption is rebuttable. The appellant showed that the husband had ceased to be a promoter long before the relevant period, that she regularly traded in the shares in the ordinary course, and that her purchases and sales occurred before, during, and after the relevant announcements. The trading pattern did not indicate that the transactions were motivated by the unpublished information relating to financial results, dividend, or bonus issue.

Conclusion: The charge of insider trading was not established against the appellant, and the adverse order could not be sustained.

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