Appeal successful as no proof of insider trading found. Burden of proof on prosecution. Interim order quashed.

The confirmatory order dated 15th September 2021, upholding the interim order against the appellant, was challenged. The Tribunal found no evidence of the appellant accessing or communicating Unpublished Price Sensitive Information (UPSI). The confirmatory order was quashed, and the appeals were allowed. The Tribunal emphasized that the burden of proof lies with the prosecution to establish the appellant's involvement with UPSI. The continuation of the interim order was deemed unjustified, and the appellant was not barred from the securities market.

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Issues Involved:
1. Validity of the confirmatory order dated 15th September 2021.
2. Determination of the appellant as an insider under Regulation 2(1)(g) of the PIT Regulations.
3. Access to Unpublished Price Sensitive Information (UPSI) by the appellant.
4. Burden of proof regarding possession and communication of UPSI.
5. Justification for continuation of the interim order against the appellant.

Issue-wise Detailed Analysis:

1. Validity of the Confirmatory Order:
The appeal challenged the confirmatory order dated 15th September 2021, which upheld the ex-parte ad-interim order restraining the appellant from trading in securities. The Tribunal found that the continuation of the interim order was unjustified, as there was no direct or indirect evidence proving the appellant's access to or communication of UPSI. The confirmatory order was quashed, and the appeals were allowed.

2. Determination of the Appellant as an Insider:
The Tribunal examined whether the appellant was an insider under Regulation 2(1)(g) of the PIT Regulations, which defines an insider as a connected person or someone in possession of UPSI. The Whole Time Member (WTM) initially concluded that the appellant was an insider due to his senior position in the company, which supposedly gave him access to UPSI. However, the Tribunal found that mere employment in a senior position does not automatically imply possession of UPSI.

3. Access to Unpublished Price Sensitive Information (UPSI):
The WTM's decision was based on the assumption that the appellant, due to his role, had access to UPSI. However, the Tribunal noted that the structured digital database (SD database) mandated under Regulation 3(5) of the PIT Regulations did not list the appellant or the designated person Mr. Venkata Subramaniam as having access to UPSI. Furthermore, the Tribunal found that the telephonic conversations between the appellant and Mr. Venkata were related to official matters and not UPSI, thereby discharging the initial burden of proof on the appellant.

4. Burden of Proof Regarding Possession and Communication of UPSI:
The Tribunal emphasized that the burden of proof lies with the prosecution (SEBI) to establish that the appellant had access to UPSI or was an insider. The WTM had wrongly placed the burden on the appellant to prove that he did not pass on UPSI to Mr. Amit Bhutra. The Tribunal found that the appellant had successfully discharged his burden by providing evidence that his communications were unrelated to UPSI.

5. Justification for Continuation of the Interim Order:
The Tribunal concluded that the continuation of the interim order was not justified based on prima facie suspicion or preponderance of probability. The appellant had not traded in the scrip, and there was no evidence of him being a party to any unlawful gain. The Tribunal held that debarring the appellant from accessing the securities market was unwarranted, especially when the investigation was still ongoing and no show cause notice had been issued.

Conclusion:
The confirmatory order and the interim order were quashed, and the appeals were allowed. The Tribunal directed that the investigation should continue without being influenced by the observations made in the present order, which were tentative in nature. The parties were directed to bear their own costs, and the order was digitally signed for implementation.

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