Authority: Supreme Court of India (Civil Appellate Jurisdiction)

Order Date: August 11, 2026

Case Overview

  • Parties: Securities and Exchange Board of India (SEBI) as appellant; Respondents – Rajeev Vasant Sheth (Chairman & MD of Tara Jewels Ltd), his daughters Aarti Sheth and Divya Sheth. The dispute concerns alleged insider trading in Tara Jewels Limited (TJL), a listed jewellery company.
  • Background: During the Unpublished Price Sensitive Information (UPSI) period 02‑Oct‑2017 to 29‑Nov‑2017, the respondents sold a total of 30,93,948 shares (≈12.56% of TJL’s holding) by Mr. Sheth and 29,75,000 shares subsequently, while his daughters sold their entire holdings of 1,14,440 shares each. The sales avoided an estimated loss of Rs 1.38 crore. SEBI issued an Impounding Order‑cum‑Show Cause Notice on 04‑Sep‑2020, leading to a Whole‑Time Member (WTM) order on 24‑May‑2021 that found the respondents guilty of insider trading and imposed disgorgement and monetary penalties (Rs 25 lakh for Rajeev, Rs 10 lakh each for the daughters, plus additional penalties under Regulation 6 of the Minimum Standards).
  • SAT Proceedings: The respondents appealed to the Securities Appellate Tribunal (SAT). SAT set aside the WTM order, accepting the defence that the trade was made to avoid a downgrade to a non‑performing asset and noting negligible price difference on 29‑Nov‑2017 and 30‑Nov‑2017.
  • Legal Provisions Invoked: SEBI relied on Sections 12A, 15G, 15J, 15Z of the SEBI Act and the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations 2015, particularly Regulation 4(1) and its presumption clause. The Supreme Court examined definitions of “connected person”, “insider”, and “UPSI”, and reviewed case law including SEBI v. Abhijit Rajan and P. Mohanraj v. Shah Bros. Ispat.
  • Court’s Reasoning: The Court held that the respondents were in possession of UPSI and that the purpose of the proceeds is irrelevant under Regulation 4(1). It rejected the SAT’s reliance on the downgrade defence and affirmed that the presumption of insider trading stands unless a specific defence under Regulation 4(1) is proven, which was not the case.

Final Outcome

  • The SAT order quashing the penalties is set aside.
  • Disgorgement of the loss avoided (≈ Rs 1.38 crore) is reinstated; respondents must remit the amount with 12% per annum interest from 30‑Nov‑2017 within 45 days of receipt of the order.
  • Monetary penalties are re‑imposed: Rs 10 lakh each for Rajeev Vasant Sheth, Aarti Sheth, and Divya Sheth (Rajeev’s penalty reduced from Rs 25 lakh to Rs 10 lakh, matching the daughters).
  • Additional penalties under Clause 6 of the Minimum Standards (Rs 5 lakh for Rajeev, Rs 1 lakh each for Aarti and Divya) remain in force.
  • All disgorged amounts are to be credited to the Investor Education and Protection Fund (IEPF) under Section 11(5) of the SEBI Act.
  • The penalties must be paid within three months of the order if not already satisfied.
  • The judgment is signed by Justices Sanjay Karol and Nongmeikapam Kotiswar Singh.

Topics: Insider Trading, SEBI Enforcement, Supreme Court Judgment