TaxTMI 
TaxTMI 
2025 (3) TMI 274
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....o pay penalties mentioned in the order. 2. Brief facts of the case are as under :- i. The appellant No. 1 is a CA, who is also the CMD and holds 99.98% equity in the appellant No. 2 company. The appellant No. 2 is into the business of providing financial services. Biocon (Biocon - M/s Biocon Ltd.) (called as "company") is a prominent biopharmaceutical company engaged in research and manufacturing of pharma ingredients. iii. SEBI noted that Biocon had made an announcement on January 18, 2018 at 15:44 hrs. at BSE (BSE - Bombay Stock Exchange) regarding its exclusive global collaboration with Sandoz on next- generation Bio-similars. Observing that certain persons had traded in the scrip of Biocon while in possession of UPSI (UPSI - Unpublished Price Sensitive Information) relating to the above, SEBI carried out investigation for violation of PIT Regulations, 2015 PIT Regulations - SEBI (Prohibition of Insider Trading) Regulations, 2015, during the period December 4, 2017 to January 18, 2018 ("Investigation Period"). iv. A common show cause notice dated August 3, 2020 was issued to both appellants. SEBI noted that the appellant No. 1 was in frequent commun....
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....intly and severally directed to disgorge the same. (b) In addition, a penalty of Rs. 10 lakh each has been levied on both the appellants separately under Section 15G(i) of the SEBI Act, 1992 (SEBI Act - Securities & Exchange Board of India Act, 1992). (c) Lastly, both appellants have been restrained from dealing in the securities market for a period of one year from the date of the order. Aggrieved by this order, appellants have filed this appeal. 3. Before us, Mr. Pesi Modi, learned senior advocate for the appellants and Mr. Gaurav Joshi, learned senior advocate for the respondent SEBI have made detailed submissions. 4. Mr. Pesi Modi submitted that even though the appellant was working in advisory capacity on CIMAB deal during January to July 2017, and continued till December 2017 for compliance with condition subsequent clauses, there is no evidence that he had access to the UPSI relating to the Biocon-Sandoz deal. He submitted that Biocon has a robust Code of processes and procedures for disclosure of UPSI and UPSI is shared with only concerned employees of the company and certain designated persons on 'need to know' basis upon signing of a confidentia....
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....the SEBI, Mr. Gaurav Joshi submitted that it is an admitted position that the appellant No. 1 was not only connected with the Equillbrium transaction and CIMAB Licensing Deal, but was also an independent Director in Mazumdar Shaw Medical Foundation. He also provides broking services through appellant No. 2 to the promoters and the then CEO and Joint MD, Mr. Arun Chandavarkar, who had access to UPSI. This indicates that first appellant was in frequent communication with the promoters and KMPs of Biocon, who were directly involved in negotiations for the Sandoz deal and the CIMAB Licensing Deal, both. 5.1 Adverting to the trading behavior, Shri Joshi submitted that there was no trading by the first appellant in Biocon scrips after August 16, 2017 till January 18, 2018 for five months in pre-UPSI phase and he had purchased 1,32,500 shares as on August 16, 2017. He pointed out that prior to buying 85,000 shares of Biocon during UPSI period, appellant No. 2 purchased only 14,500 shares till September 7, 2016. Similarly, the first appellant had executed only 4 trades of Biocon in 2016 aggregating to 20,500 shares. However, once he started advising Biocon on the Equilibrium / CIMAB ....
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....who were concurrently working on the Sandoz deal (being the UPSI in question). 5.4 The learned senior advocate also relied upon the decision of the Hon'ble Supreme Court in the case of SEBI vs. Kishore R. Ajmera [(2016) 6 SCC 368], which emphasizes the standard of proof of 'preponderance of probability' in arriving at an inferential conclusion from the proved and admitted facts so long as the same are reasonable and can be legitimately arrived at, on a consideration of totality of facts and material. This has not been disturbed in the Balram Garg (supra) case. 5.5 Mr. Joshi submitted that the Hon'ble Supreme Court, in the case of Chintalapati Srinivasa Raju vs. SEBI [(2018) 7 SCC 443] has affirmed the law laid down in the Kishore R. Ajmera (supra) case of drawing 'reasonable inferences on foundational facts'. He also drew our attention to the case of SEBI vs. Abhijit Rajan [2022 SCC Online 1241], which held that the test in such cases is that of 'preponderance of probabilities' by applying the process of inferential conclusion drawn on foundational facts. Further, reliance was also placed on decisions of this Tribunal in the case of Utsav Pathak vs. SEBI, Navin Kumar Tayal & ....
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....s. Kiran Mazumdar Shaw, CMD and also of Mr. Arun Chandawarkar (CEO and Joint MD). He evidently enjoyed the trust and confidence of the promoters of Biocon and KMPs including CEO and CFO. We find that the appellant No. 1 was also working in advisory capacity with Biocon on the CIMAB licensing deal from January to July, 2017 and thereafter December 2017. In view of this, undoubtedly he was in 'frequent communication' with KMPs and also in 'contractual relationship' with the company. 6.4 Both the CIMAB and Sandoz had cross-border collaborations for different products, the first one with the Cuban research company CIMAB and the second one with Sandoz-Novartis, ostensibly for 'business expansion' of the company. With regard to CIMAB licensing deal, Biocon had first established a joint venture company with CIMAB in 2004 and later in 2010 acquired the entire shareholding in the joint venture Biocon Biologicals Ltd. The Equilibrium deal had two related limbs i.e. (i) a licensing agreement with CIMAB (Cuba) for acquiring rights to carry out research / manufacturing of anti-CD6 monoclonal antibody molecule in its geography; and (ii) for sub-licensing the same to M/s. Equilibrium Inc. (USA....
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....a high probability that in contrast with the rest of the universe, one person upon whom, other than the designated persons for Sandoz deal, could be relied upon for building Sandoz deal, was appellant No. 1 being an expert on cross-border collaboration. 6.4.3 We note that, the appellant No. 1 (through the appellant No. 2) was handling the trading account of Mrs. Kiran Mazumdar Shaw (CMD) herself and of Mr. Arun Chandawarkar, Joint CMD and CEO, which gives close access to them. Undisputedly, the appellant No. 1 was in close association with KMP of Biocon and Mr. Arun Chandawarkar, CEO and joint MD of Biocon and CFO of Biocon Mr. Sidharth Mittal both were directly involved in the negotiations on the Biocon-Sandoz deal as also in CIMAB licensing deal. In view of this, appellant No. 1 was undoubtedly in frequent and regular communication with senior managerial persons of Biocon, who had direct knowledge of UPSI. Keeping in view this and considering the twin sensitive assignment being handled by the appellant No. 1 - (a) advising on CIMAB licensing deal, which allowed him frequent access to CEO and CFO during the year long deal period while these KMPs were also negotiating the San....