The Supreme Court of India has ruled that under the SEBI (Prohibition of Insider Trading) Regulations, 2015, the mere possession of Unpublished Price Sensitive Information (UPSI) while executing a securities transaction is sufficient to establish insider trading liability.

Rejection of 'Corporate Purpose' and Lack of Profit Motive Defenses

A Bench comprising Justice Sanjay Karol and Justice N. Kotiswar Singh set aside an order of the Securities Appellate Tribunal (SAT) which had exonerated promoters who sold company shares during financial distress to infuse working capital back into the company.

The Court held that the note to Regulation 4(1) of the 2015 Regulations creates an explicit statutory presumption that trades executed while possessing UPSI are motivated by that knowledge:

  • Irrelevance of Motive: The reasons for which a person trades or the specific corporate purpose to which the sale proceeds are applied are irrelevant under the 2015 regulatory framework.
  • Distinction from 1992 Regulations: The Bench distinguished earlier precedents under the 1992 Regulations (such as Abhijit Rajan), clarifying that the subjective 'state of mind' or profit-motive defense does not survive the statutory text of the 2015 Regulations.

The judgment establishes a strict liability standard for insiders trading during UPSI windows unless they fall squarely within the narrow statutory provisos under Regulation 4(1).