By Jayant M. Thakur
Chartered Accountant
BACKGROUND
Recently, vide decision dated 19th April 2022, the Supreme Court reversed the order of disgorgement and penalty of about Rs. 8.30 crores and the parties’ debarment, in a case of alleged insider trading. In doing so, it laid down important principles of proof in insider trading cases. More importantly, it is submitted that it effectively read down its own decision in an earlier case that required lesser levels of proof in cases of civil actions (as against criminal actions). It is submitted that insider trading cases will now require not just greater levels of proof by SEBI for action, but it will be subjected to a greater level of scrutiny. The Supreme Court had earlier held (in
SEBI vs. Kishore R. Ajmera (2016) 6 SCC 368) that the standards with which to see civil proceedings were ‘preponderance of probability’ and not ‘beyond reasonable doubt’, which is so in criminal proceedings. By a curious observation, as we will see later herein, the Supreme Court in the present case distinguished
Kishore Ajmera’s case as a case of fraud/price manipulation while the present case was of insider trading. The decision is in the case of
Balram Garg vs. SEBI ((2022) 137 Taxmann.com 305 (SC)).It is submitted that this decision will thus now require greater efforts of investigation and legal reasoning by SEBI to take penal action in cases of insider trading,
