Supreme Court Holds That Trading While In Possession Of Unpublished Price Sensitive Information Attracts The Presumption Of Insider Trading, Irrespective Of Motive Or Profit

The Supreme Court of India, through its judgment dated 11.08.2026 in Securities and Exchange Board of India v. Rajeev Vasant Sheth and Others¹, set aside the order of the Securities Appellate Tribunal (“SAT”) and restored the finding of insider trading recorded by SEBI against the promoters of Tara Jewels Limited.

Between 02.10.2017 and 29.11.2017, the Chairman and Managing Director of Tara Jewels Limited, along with two other promoter-directors, sold substantial portions of their shareholding, two of them exiting entirely, while in possession of adverse unpublished price sensitive information (“UPSI”) comprising a quarterly loss of INR 166.80 Crore and a steep decline in sales, which was disclosed to the market only on 29.11.2017. SEBI found that the timing of the trades enabled the promoters to avoid losses of approximately INR 1.38 Crore. On appeal, SAT exonerated the promoters, accepting that the sales were made to support financial restructuring and to avert classification of certain loans as non-performing assets, and noting only a marginal price movement before and after disclosure.

The issue before the Court was whether a commercially justified purpose behind the trade, or the absence of any actual profit, displaces the presumption arising under Regulation 4(1) of the SEBI (Prohibition of Insider Trading) Regulations, 2015 (“Insider Trading Regulations”).

The Court held that the note to Regulation 4(1) of Insider Trading Regulations proceeds on the assumption that a trade executed while in possession of UPSI was motivated by that information. Once possession of UPSI and trading during the relevant window are established, the enquiry cannot be shifted to whether the insider had a well-intentioned or commercially justified reason for the transaction, nor to the manner in which the sale proceeds were applied. Actual monetary gain is not an ingredient of the contravention, rather the act of trading while in possession of UPSI suffices. The Court distinguished its earlier decision in SEBI v. Abhijit Rajan², as having been rendered under the erstwhile SEBI (Prohibition of Insider Trading) Regulations, 1992 which contained no comparable prohibition permitting the purpose of the sale to be taken into account.

Footnotes

^{1 Civil Appeal No. 4905 of 2022}

^{2 (2024) 11 SCC 645.}

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