The Supreme Court has reinstated SEBI’s insider-trading findings against Tara Jewels promoters, emphasising that the purpose of sale proceeds does not exempt trades made with unpublished price-sensitive information, marking a significant shift in regulatory interpretation.
The Supreme Court of India has restored SEBI’s insider-trading findings against the promoters of Tara Jewels, ruling that the purpose for which sale proceeds were eventually used does not matter once trading while in possession of unpublished price-sensitive information is established. A bench of Justices Sanjay Karol and Nongmeikapam Kotiswar Singh set aside the Securities Appellate Tribunal’s decision and reinstated the regulator’s core findings against former chairman and managing director Rajeev Vasant Sheth and his two daughters.
The case arose from heavy losses at Tara Jewels, a listed company that later went into liquidation. According to the court record, the company’s September 2017 quarter results showed a sharply deeper loss and a steep fall in sales. During the relevant period in October and November 2017, Sheth sold a large block of shares, while Aarti Sheth and Divya Sheth each sold their entire holdings. SEBI said the trades enabled the family to avoid losses of about ₹1.38 crore when the weak financial results became public.
SEBI’s whole-time member had held that the sales breached Section 12A of the SEBI Act and the 2015 Prohibition of Insider Trading Regulations, ordering disgorgement with interest, market bans and monetary penalties. The SAT later overturned that order, accepting the family’s explanation that the sales were driven by concern that the company might be tagged a non-performing asset. It also treated the closing prices around the disclosure date as weakening SEBI’s case. But the Supreme Court said the 2015 regulations create a rebuttable presumption against trades made while an insider holds unpublished price-sensitive information, and that the note to Regulation 4(1) makes the later use of proceeds legally irrelevant.
The court also rejected reliance on the older “legitimate corporate purpose” defence recognised under earlier insider-trading rules, saying that line of reasoning does not survive under the current framework. It distinguished the 2024 ruling in SEBI v. Abhijit Rajan, noting that case was decided under the predecessor regime and involved a different price movement. The bench restored the disgorgement and market restraints in full, but reduced Sheth’s penalty under Section 15G from ₹25 lakh to ₹10 lakh, matching the minimum imposed on the others. The amount is payable within three months.
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