2025 (12) TMI 459 - SCH - SEBI

SC upholds SEBI insider trading penalties for selective, undisclosed UPSI under 2015 Regulations; appeal dismissed as factual

Reliance Industries Limited & Ors. Versus Securities and Exchange Board of India.

SC upheld SEBI's findings of insider trading and violation of the 2015 Regulations concerning non-disclosure and selective disclosure of unpublished price ... Insider trading violations - non- disclosure of unpublished and selective disclosure of price sensitive information - imposition of the penalties - HELD THAT:- The conclusion drawn by SEBI with respect to the violation of the 2015 Regulations, whereby there is a statutory duty of disclosing unpublished/ selectively published price sensitive information so as to make it generally available and embargo against insider trading, we are satisfied that no case to interfere with the impugned order is made out, especially in light of the following factual scenario, which remains uncontroverted. That apart, the issues dealt with by the SEBI and the Tribunal are substantially a question of fact, giving rise to no substantial question of law that may warrant consideration by this Court at length. Appeal is, accordingly, dismissed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the findings of violation of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, including Principles (1) and (4), and corresponding provisions under the SEBI (LODR) Regulations, 2015, in relation to non-disclosure and selective disclosure of unpublished price sensitive information, were justified. 1.2 Whether the appeal raised any substantial question of law warranting interference with the concurrent factual findings of the Adjudicating Officer and the Securities Appellate Tribunal regarding insider trading-related disclosure obligations. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Justification of SEBI's findings of violation of disclosure-related obligations under the 2015 Regulations and LODR Regulations Legal framework (as discussed) 2.1 The Court referred to the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, in particular Principles (1) and (4), and to Sections 30(10) and 30(11) of the SEBI (LODR) Regulations, 2015. 2.2 Principle (1) stipulates prompt public disclosure of unpublished price sensitive information that would impact price discovery as soon as credible and concrete information comes into being, so as to make it generally available. 2.3 Principle (4) mandates prompt dissemination of unpublished price sensitive information that has been selectively disclosed, to make the same generally available. Interpretation and reasoning 2.4 The Court noted that negotiations between the concerned entities had reached the stage of a non-binding term sheet dated 04.03.2020, preceded by confidentiality and non-disclosure arrangements. 2.5 It was noticed that, during ongoing negotiations, a news article dated 24.03.2020 in international media, followed by other media reports, disclosed that a preliminary deal for acquisition of a significant stake was close to being signed. 2.6 The Court examined SEBI's conclusion that there existed a statutory duty to disclose unpublished or selectively published price sensitive information so as to make it generally available, coupled with an embargo against insider trading, and found no infirmity in that conclusion. 2.7 The Court particularly relied on the uncontroverted factual scenario that, following publication of the news articles on 24-25.03.2020, the price of the relevant scrip rose by almost 15% on 25.03.2020 as against the previous day's closing price, whereas following the formal corporate announcement on 22.04.2020, the price rise was about 10%, which was comparatively lower. 2.8 On this basis, the Court accepted SEBI's and the Tribunal's inference that the information in question was price sensitive and that the regulatory obligation to ensure prompt and general availability of such information had been attracted and violated. Conclusions 2.9 The Court held that the findings of SEBI and the Tribunal regarding violation of Principles (1) and (4) of the 2015 Regulations read with the relevant LODR provisions were justified on the facts. 2.10 No ground was made out to interfere with the imposition of monetary penalty as upheld by the Tribunal. Issue 2 - Existence of any substantial question of law warranting interference Interpretation and reasoning 2.11 The Court observed that the issues dealt with by SEBI and the Tribunal were substantially questions of fact, turning on appreciation of the factual matrix, including the stage of negotiations, the timing and content of media reports, and the market price movement. 2.12 The Court held that such factual determinations did not give rise to any substantial question of law requiring detailed examination or warranting interference in appellate jurisdiction. Conclusions 2.13 The Court declined to reappreciate the concurrent factual findings of SEBI and the Tribunal. 2.14 The appeal was dismissed, and the penalty imposed for the insider trading-related disclosure violation stood affirmed; all pending applications were disposed of.