Unpublished price sensitive information can include a company's own investment decision, with insider trading proved by circumstantial evidence.

A company's proposed decision to acquire shares in another listed company was treated as unpublished price sensitive information because it was not in the public domain, could materially affect the target's price, and need not have been known by the issuer of the traded securities. The appellant was found to be an insider on the basis of position, access, repeated contacts, trade timing, funding pattern, and trading through a spouse's account, with circumstantial evidence sufficient to show trading on such information. The plea that non-supply of the full investigation report breached natural justice failed because the required findings were communicated and no prejudice was shown. The penalty orders were therefore sustained.

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Issues: (i) whether the decision taken by Solrex to purchase shares of the target company constituted unpublished price sensitive information for the purposes of the insider trading regulations; (ii) whether the appellant was an insider who traded in the target company's shares on the basis of such information; (iii) whether non-supply of the full investigation report vitiated the proceedings on the ground of breach of natural justice.

Issue (i): whether the decision taken by Solrex to purchase shares of the target company constituted unpublished price sensitive information for the purposes of the insider trading regulations.

Analysis: The expression price sensitive information was held to be wide enough to include information relating directly or indirectly to a company. The decision of Solrex to acquire shares of the target company was not in public domain and was known only to insiders of Solrex. The Court distinguished between a decision affecting the company whose shares are being dealt in and the company in possession of the decision, and held that the information need not be in the knowledge of the issuer of the traded securities. The decision was therefore capable of materially affecting the price of the target company's securities and amounted to unpublished price sensitive information.

Conclusion: The decision of Solrex to buy shares of the target company was unpublished price sensitive information, and the point was decided against the appellant.

Issue (ii): whether the appellant was an insider who traded in the target company's shares on the basis of such information.

Analysis: The appellant was a connected person by reason of his position and access to information within Ranbaxy. The evidence of repeated telephonic contact with key persons, the timing of the trades, the source of funds, and the sequence of corporate decisions was treated as sufficient circumstantial evidence. The Court held that the denial statements were not reliable direct evidence because they were qualified by inability to recollect and did not exclude the inference drawn from the surrounding circumstances. The trading through the wife's account, immediately before Solrex's purchases, supported the conclusion that the appellant acted on the unpublished information.

Conclusion: The appellant was an insider and had traded on unpublished price sensitive information, so the finding of violation was upheld.

Issue (iii): whether non-supply of the full investigation report vitiated the proceedings on the ground of breach of natural justice.

Analysis: The applicable regulations required communication of the investigation findings, and the findings were furnished to the appellants. The Court held that the procedural requirement under the regulations had been complied with and that no prejudice was shown from non-furnishing of the complete investigation report.

Conclusion: The plea of breach of natural justice was rejected.

Final Conclusion: The impugned penalty orders were sustained because the trading was found to be based on unpublished price sensitive information and the procedural challenge also failed.

Ratio Decidendi: Information relating to a company's own proposed investment decision in another listed company can constitute unpublished price sensitive information for insiders of the first company, and insider trading may be proved by a chain of circumstantial evidence where the surrounding facts reasonably establish access to and use of that information.

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