UNIVERSITY MOOT COURT SELECTION, 2022

Participant Code: T25

DR. RAM MANOHAR LOHIYA NATIONAL LAW UNIVERSITY, LUCKNOW

UNIVERSITY MOOT COURT SELECTION, 2022

Before,

THE HON’BLE SECURITIES APPELLATE TRIBUNAL OF PINDIA

APPEAL

UNDER SECTION 15T OF THE SECURITIES AND EXCHANGE BOARD OF

INDIA ACT, 1992

IN THE MATTER OF

MOON PHARMA AND BENNETT…………………………..……………..APPELLANT

Versus

SECURITIES BOARD OF PINDIA……………………………….………RESPONDENT

CLUBBED WITH

JANE AND DARCY…………………………………………………………..APPELLANT

Versus

SECURITIES BOARD OF PINDIA……………………………………. RESPONDENT

WRITTEN SUBMISSION ON BEHALF OF THE APPELLANT

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TABLE OF CONTENTS

TABLE OF CONTENTS ........................................................................................................ 2

LIST OF ABBREVIATIONS ................................................................................................. 4

INDEX OF AUTHORITIES ................................................................................................... 5

STATEMENT OF JURISDICTION ...................................................................................... 8

STATEMENT OF FACTS ...................................................................................................... 9

STATEMENT OF ISSUES ................................................................................................... 10

SUMMARY OF ARGUMENTS ........................................................................................... 11

ARGUMENTS ADVANCED ................................................................................................ 14

ISSUE A: WHETHER THE INFORMATION AND AGREEMENTS PERTAINING TO THE DEAL

BETWEEN MOON PHARMA & BOCKHARDT WAS UPSI IN TERMS OF THE PIT REGULATIONS ?

.............................................................................................................................................. 14

[A.1] INFORMATION DOESN’T FULFIL THE ESSENTIAL CONDITIONS OF UPSI UNDER PIT
REGULATIONS. ................................................................................................................... 14

[A.2] INFORMATION WAS GENERALLY AVAILABLE TO THE PUBLIC. ................................... 15

[A.3] DEAL WAS IN THE ORDINARY COURSE OF COMPANY’S BUSINESS. ............................. 16

ISSUE B: WHETHER THE FACTS OF THE MATTER WARRANTED PASSING OF AN EX PARTE

AD INTERIM ORDER AND WHETHER SBP HAS EXERCISED ITS POWERS WITHIN THE

CONFINES OF THE LAW OF LAND?........................................................................................ 18

[B.1] URGENCY CANNOT BE ESTABLISHED. ....................................................................... 18

[B.2] ABSENCE OF CIRCUMSTANTIAL EVIDENCE. ............................................................... 19

[B.3] VIOLATION OF NATURAL JUSTICE. ........................................................................... 21

ISSUE C: WHETHER SBP’S REFUSAL TO PROVIDE THE INFORMATION & DOCUMENTS, AS

SOUGHT BY DARCY AND JANE, IS IN ACCORDANCE WITH THE PRINCIPLES OF NATURAL

JUSTICE? .............................................................................................................................. 22

[C.1] VIOLATION OF THE PRINCIPLE OF AUDI ALTERUM PARTUM. .................................... 22

[C.2] VIOLATION OF ART. 14. ............................................................................................ 25

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[C.3] VIOLATION OF ART. 21. ............................................................................................ 26

ISSUE D: WHETHER THE TRADES UNDERTAKEN BY DARCY WERE IN VIOLATION OF THE

PIT REGULATIONS? ............................................................................................................ 26

[D.1] DARCY IN NOT AN INSIDER UNDER PIT REGULATIONS. ............................................ 27

[D.2] CIRCUMSTANTIAL EVIDENCE SHOWING NO POSSESSION OF UPSI. ............................ 28

[D.3] TELEPHONIC COMMUNICATION DID NOT AMOUNT TO INSIDER COMMUNICATION. .... 30

[D.4] SINCE DARCY DID NOT ACT ON THE SAID INFORMATION, HE DID NOT MAKE PROFIT. 31

PRAYER ................................................................................................................................. 33

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LIST OF ABBREVIATIONS

ABBREVIATION EXPANSION

¶ PARAGRAPH

S SECTION

AIR ALL INDIA REPORTER

ALT ANDHRA LAW TIMES

ALR AMERICAN LAW REPORTS

ART. ARTICLE

UPSI UNPUBLISHED PRICE SENSITIVE

INFORMATION

CIT COMMISSIONER OF INCOME TAX

ER ALL ENGLAND LAW REPORTS

SAT SECURITIES APPELLATE TRIBUNAL

SBP SECURITIES BOARD OF PINDIA

SC SUPREME COURT

SEBI SECURITIES AND EXCHANGE BOARD OF

INDIA

SCC SUPREME COURT CASES

SCR SUPREME COURT REPORTS

TAX LR TAXATION LAW REPORTS

WLR WEEKLY LAW REPORTS

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INDEX OF AUTHORITIES

CASES

Asiatic Oxygen Ltd v STO, [1982] Tax LR (NOC) 200 (Ori) .................................................. 23
Balram Garg v SEBI, 2022 SCC OnLine SC 472 ............................................................. 27, 29
Cameo Corporate Services Ltd v Securities and Exchange Board of India, 2019 SCC OnLine
SAT 249 ............................................................................................................................... 18
Chandrakala v SEBI, 2021 SCC OnLine SAT 1905 ............................................................... 31
Cooper v Wands worth Board of Works, (1863) 143 ER 414 ................................................. 22
Delhi Transport Corporation v DTC Mazdoor Union, AIR 1991 SC 101 .............................. 25
Dhaksheshwari Cotton Mills v CIT, AIR 1955 SC 154 ........................................................... 22
Gautam Thapar & Ors v SEBI, 2020 SCC OnLine SAT 435 ................................................. 19
Godrej Properties Ltd v Goldbricks Infrastructure Pvt Ltd, 2021 SCC OnLine Bom 3448 ... 21
Gujarat NRE Mineral Resources Ltd v Securities and Exchange Board of India, 2011 SCC
OnLine SAT 186 .................................................................................................................. 16
I E Vittal v Appropriate Authority & Ors, 1996 (3) ALT 707 ................................................. 23
In Re Emami Limited and Ors, 2022 SCC OnLine SEBI 37 ................................................... 14
In Re: Trading in the scrip of Moons Technologies Ltd, 2018 SCC OnLine SEBI 193 .......... 15
J C Mansukhani v Securities and Exchange Board of India, 2019 SCC OnLine SAT 91 ...... 17
J C Manusukhani v Securities and Exchange Board of India, 2021 SCC OnLine SAT 757 .. 15
Liberty Oil Mills & Ors v Union of India & Ors, AIR (1984) SC 1271.................................. 18
Maneka Gandhi v Union of India, (1978) 1 SCC 248 ....................................................... 21, 25
North End Foods Marketing Pvt Ltd v SEBI, 2019 SCC OnLine SAT 6 ................................ 17
Ponkunnam Traders v Addl ITO, 1972 83 ITR 508 Ker.......................................................... 23
Rajiv B Gandhi v SEBl, 2020 SCC OnLine SAT 14................................................................ 31
Rakesh Agarwal v SEBI, (2004) 49 SCL 351 (SAT) ............................................................... 30
Ridge v Baldwin, (1963) 2 WLR 935....................................................................................... 22
Rupesh Kantilal Savla v SEBI, 2021 SCC OnLine SAT 23 .................................................... 14
Sahara India (Firm) v CIT, (2008) 14 SCC 151...................................................................... 23
Sanjay Gupta v SEBI, 2020 SCC OnLine SAT 88 .................................................................. 19
SEBI v Udayant Malhoutra, (2021) 1 SCC 219 .......................................................... 17, 18, 19
SEC v Texas Gulf Sulphur Co, 2 ALR Fed 190 ....................................................................... 30

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State of Orissa v Binapani, 1967 SCR (2) 625 ........................................................................ 22

Suraj Mall Mohta and Co v A V Visvanatha Sastri, AIR 1954 SC 545 .................................. 23
T Takano v SEBI & Anr, 2022 SCC OnLine SC 210............................................................... 22

STATUTES

Indian Evidence Act, 1872, s 6 ................................................................................................ 29

REGULATIONS

SEBI (Prohibition of Insider Trading) Regulations, 2015, reg 2(1)(d)(ii) ............................... 26

SEBI (Prohibition of Insider Trading) Regulations, 2015, reg 2(1)(g).................................... 26
SEBI (Prohibition of Insider Trading) Regulations, 2015, reg 2(1)(n)(vi) .............................. 14
SEBI (Prohibition of Insider Trading) Regulations, 2015, reg 2(1)(n).............................. 13, 14
SEBI (Prohibition of Insider Trading) Regulations, 2015, reg 27 ........................................... 20
SEBI (Prohibition of Insider Trading) Regulations, 2015, reg 3 ............................................. 30
SEBI (Prohibition of Insider Trading) Regulations, 2015, s 11A...................................... 19, 20
SEBI (Prohibition of Insider Trading) Regulations, 2015, s 11B ............................................ 19
SEBI (Prohibition of Insider Trading) Regulations, 2015, s 2(ha) .......................................... 29
Securities and Exchange Board of India (Intermediaries) Regulations 2008, ch V ................ 20

CONSTITUTIONAL PROVISIONs

The Indian Constitution, Art 14 ............................................................................................... 24

The Indian Constitution, Art 21 ............................................................................................... 25

MOOT PROPOSITION

Moot Proposition, ¶ 12....................................................................................................... 16, 17

Moot Proposition, ¶ 13....................................................................................................... 19, 28
Moot Proposition, ¶ 17................................................................................................. 19, 24, 28
Moot Proposition, ¶ 3............................................................................................................... 31
Moot Proposition, ¶ 5................................................................................................... 15, 16, 28
Moot Proposition, ¶ 6............................................................................................................... 15
Moot Proposition, ¶ 7......................................................................................................... 27, 29
Moot Proposition, ¶ 8............................................................................................................... 28

JOURNAL ARTICLES

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Ganesh Prasad and Sanjay Khan, ‘Insider Trading Regulations in India: A Comparative and
Critical Analysis of SEBI's 2015 PIT Regulations’ GNLU L. Rev. 4 (2013): 109 ............. 27
Prateek Bhattacharya, ‘India's Insider Trading Regime: How Connected Are You?' NYUJL &
Bus. 16 (2019): 1 .................................................................................................................. 31

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STATEMENT OF JURISDICTION

I. Appeal No. 202 of 2022

The Appellants have approached the Hon’ble Court under Section 15T of The Securities and
Exchange Board of India Act, 1992 which have been posted for hearing by the Hon’ble
Securities Appellate Tribunal.

II. Appeal No. 317 of 2022

The Appellants have approached the Hon’ble Court under Section 15T of The Securities and
Exchange Board of India Act, 1992 which have been posted for hearing by the Hon’ble
Securities Appellate Tribunal.

The Counsels for the Appellant, hereby humbly submit this memorial with regard to the appeals
filed before this Hon’ble Court, under Section 15T of The Securities and Exchange Board of
India Act, 1992 which have been posted for hearing by the Hon’ble Securities Appellate
Tribunal.

This memorandum sets forth the facts, contentions and arguments for the Appellant in the given
case.

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STATEMENT OF FACTS

ABOUT THE MOON PHARMA

Moon Pharma was incorporated on December 21, 1985 in the country Pindia and is into the
business of research and manufacturing of medicines and medical products. It is the second
largest pharmaceutical company in Pindia after Tibbott.

BACKGROUND

In 2020 a viral contagious disease caused by ALPHA Virus raged across the world. While all
other were not performing well, sectors such as information technology, FMGC and healthcare
were at peak and stock prices of the listed companies in these sectors continued to move
upwards. All pharmaceutical companies were in a race to produce medicines.

Bockhardt is a listed company based based out of the Union States, is the biggest
pharmaceutical company in the world in terms of the turnover. As per the news in media, the
top pharmaceutical companies in Pindia were competing to get the contract from Bockhardt.
By mid-November 2021, there was speculation in the market that Bockhardt had rejected
Tibbott’s bid and was going ahead with Moon Pharma.

12 December 2021 A preliminary sheet was signed between

Bockhardt and Moon Pharma.

24 December 2021 (4:00 AM) The companies entered into a definitive

Licensing and Supply Agreement.

24 December 2021 (8:55 hr) Bockhardt and Moon Pharma made a public
announcement of the Agreement.

December 2021 (18:00 hr) Moon Pharma announced its financial results
for the half year ending September 30, 2021.

ABOUT MR. DARCY AND MS. JANE: Mr. Darcy has worked with Moon Pharma from 2015-
2020 and thereafter, he joined Tibbott. Jane has been working with Moon Pharma since 2017.
Darcy and Jane have kept in touch and talk/meet occasionally. Both share common Whatsapp

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group for discussions and leisure betting during the live Cricket matches. Both of them
closely follow the Pindian Primier League. Darcy is also an active trader and frequently
trades in the stocks of various Pindian listed companies. He has an active portfolio with over
23 stocks with aggregate value of Rs. 10 crores approximately. His decision to buy and sell
was based on the developments in the healthcare sector on account of news in the media and
announcements made by the Government during the Alpha Virus period.

INVESTIGATION BY SBP

SBP summoned the compliance officer of Moon Pharma and directed Moon Pharma to provide
certain information with respect to the Agreement with Bockhardt. Darcy and Jane were
summoned by SBP and their statements were recorded. Bockhardt was also directed by SBP to
submit copies of deal documents and provide answers to queries of SBP as and when requested.

MOON PHARMA’S RESPONSE

The deal with Bockhardt was undertaken in the ordinary course of the company’s business and
the expected revenue pursuant to the deal was only 1.3% of the total annual revenue of the
company during FY’21. Moon Pharma did not consider it as an unpublished price sensitive
information (“UPSI”) in terms of the SBP (Prohibition of Insider Trading) Regulations, 2015
(“PIT Regulations”) or a material information.

EX- PARTE AD INTERIM ORDERS BY SBP

Order 1: As per SBP the deal between Moon Pharma and Bockhardt should have been
considered as the UPSI by Moon Pharma, the company and its compliance officer had acted in
violation of the PIT regulations. SEBI prohibited Moon Pharma from accessing capital markets
and raising funds till further orders. Further, Mr. Bennett was prohibited from taking up a
directorship in any other listed entity till further orders from SPB.

Order 2: SPB found several calls between Jane and Darcy during the months of October to
December, including a 5-minute call on October 28, 2021 at 8 pm. It was the call data and call
recordings. SBP prohibited Jane and Darcy from accessing securities market and dealing in
securities of any listed companies till further orders.

STATEMENT OF ISSUES

ISSUE A

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WHETHER THE INFORMATION AND AGREEMENTS PERTAINING TO THE DEAL BETWEEN MOON
PHARMA & BOCKHARDT WAS UPSI IN TERMS OF THE PIT REGULATIONS?

ISSUE B

WHETHER THE FACTS OF THE MATTER WARRANTED PASSING OF AN EX PARTE AD INTERIM

ORDER AND WHETHER SBP HAS EXERCISED ITS POWER WITHIN THE CONFINES OF LAW OF LAND?

ISSUE C

WHETHER SBP’S REFUSAL TO PROVIDE THE INFORMATION & DOCUMENTS, AS SOUGHT BY

DARCY AND JANE, IS IN ACCORDANCE WITH THE PRINCIPLES OF NATURAL JUSTICE?

ISSUE D

WHETHER THE TRADES UNDERTAKEN BY DARCY WERE IN VIOLATION OF THE PIT REGULATIONS?

SUMMARY OF ARGUMENTS

ISSUE A: WHETHER THE INFORMATION AND AGREEMENTS PERTAINING TO THE DEAL

BETWEEN MOON PHARMA & BOCKHARDT WAS UPSI IN TERMS OF THE PIT REGULATIONS ?

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It is most humbly submitted before this hon’ble court that the information and agreement
pertaining to the deal between Moon Pharma & Bockhardt is not UPSI in terms of PIT
Regulations. Firstly, indormation of the deal does not fulfil the essential conditions of the SEBI
PIT Regulations. According to regulation 2(1)(n) of SEBI PITR 2015, "Unpublished price
sensitive information" means any information, relating to a company or its securities, directly
or indirectly, that is not generally available which upon becoming generally available, is likely
to materially affect the price of the securities.”

Secondly, information about the deal was generally available to the public, as per the facts of
the case, the information regarding the contract between Bockhardt and the Moon pharma was
already there. By mid-November, there were speculations in the market that Bockhardt has
rejected Tibbott’s bid and was going ahead with the Moon Pharma.

Thirdly, deal was signed in the ordinary course of company’s business. Only 1.3% of the
company's total revenue for the fiscal year (FY) 21 was generated by this deal. This small sum
of money won't have an impact on the company's stock, and if the information is accurate, it
can't be said to be price sensitive because nobody's decision to buy or sell Moon Pharma stock
is influenced by the amount of money made from the deal.

Therefore, the information would not be considered as UPSI.

ISSUE B: WHETHER THE FACTS OF THE MATTER WARRANTED PASSING OF AN EX PARTE AD

INTERIM ORDER AND WHETHER SBP HAS EXERCISED ITS POWER WITHIN THE CONFINES OF

LAW OF LAND?

It is most humbly submitted before this hon’ble court that the facts of the matter don’t warrant
the passing of an ex parte ad interim order. Ex parte ad interim orders are typically made when
it is urgent to protect the public interest. Even though there was no such urgency in this
situation, the opposing party was not consulted before the order was made. Thus, there is no
reasonable basis for this order, and the facts of the case did not support the issuance of any ex-
parte ad interim orders. The SBP has acted in accordance with its authority while exceeding its
jurisdiction.

In this instance, there was no actual evidence supporting the presumption that there was an
urgent matter, only a presumption. If the appellants are engaging in insider trading and
releasing UPSI with the intention of manipulating the price, there should be some semblance

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of evidence to support this conclusion. Simply by implying that Jane and Darcy discussed the
insider information during the call on October 28, 2021, the orders against them were granted.
They implied that they had a call recording from that day even though they didn't.

ISSUE C: WHETHER SBP’S REFUSAL TO PROVIDE THE INFORMATION & DOCUMENTS, AS

SOUGHT BY DARCY AND JANE, IS IN ACCORDANCE WITH THE PRINCIPLES OF NATURAL

JUSTICE?

It is humbly submitted before the court that the SBP’s refusal to provide the information and
documents, as sought by Darcy and Jane is against the principles of natural justice because

(i) It violates the principle of Audi Alterum Partem under the principle of natural justice

(ii) It violates Art. 14

(iii) It violates Art. 21.

ISSUE D: WHETHER THE TRADES UNDERTAKEN BY DARCY WERE IN VIOLATION OF THE PIT
REGULATIONS?

The counsel humbly submits before this Hon’ble court that the trades undertaken by Darcy
were not in violation of PIT Regulations because Darcy is not an insider and he is not in
possession of UPSI according to PIT Regulations. Circumstantial evidence does not prove that
he was in the possession of UPSI.

SBP was unable to provide any documentation to support the claims that Darcy was a
"connected person" or that he had contacted or obtained UPSI on his behalf. In light of this, it
was impossible to establish a presumption that Jane told Darcy about the UPSI in the absence
of these crucial foundational facts and circumstances.

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ARGUMENTS ADVANCED

ISSUE A: WHETHER THE INFORMATION AND AGREEMENTS PERTAINING TO THE DEAL

BETWEEN MOON PHARMA & BOCKHARDT WAS UPSI IN TERMS OF THE PIT REGULATIONS ?

It is most humbly submitted before this hon’ble court that the information and agreement
pertaining to the deal between Moon Pharma & Bockhardt is not UPSI in terms of PIT
Regulations because [A.1] information doesn’t fulfil the essential conditions of UPSI under
PIT Regulations; [A.2] information was generally available to the public; and [A.3] the deal
was in the ordinary course of company’s business.

[A.1] INFORMATION DOESN’T FULFIL THE ESSENTIAL CONDITIONS OF UPSI UNDER PIT
REGULATIONS.

Regulation 2(1)(n)1 of the SEBI PITR 2015 defines UPSI as follows:

"Unpublished price sensitive information" means any information, relating to a company or its
securities, directly or indirectly, that is not generally available which upon becoming generally
available, is likely to materially affect the price of the securities and shall, ordinarily include
but not restricted to, information relating to the following:

1. financial results;
2. dividends;
3. change in capital structure;
4. mergers, de-mergers, acquisitions, delistings, disposals and expansion of business and
such other transactions;
5. changes in key managerial personnel; and
6. material events in accordance with the listing agreement

In the present case, the information and the agreements signed between Moon Pharma and
Bockhardt doesn’t come under any of the category mentioned under Reg 2(1)(n) of PIT
Regulations. In the case of Rakesh Aggarwal v. SEBI, [2004]49SCL351(SAT) it was held that
for information to qualify as ‘unpublished price sensitive information’, it must relate to the six
categories enlisted in the explanation clause. In this case, the infromation is not in any of the
six categories and therefore is not a UPSI.

1
SEBI (Prohibition of Insider Trading) Regulations, 2015, reg 2(1)(n).

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It is humbly submitted that in the case of Rupesh Kantilal Savla v SEBI2 it was held by SAT
that that one of the conditions, namely, clause (vi)3 of the Regulation 2(1)(n) of the PIT
Regulations which provided for “material event in accordance with the listing agreement” was
deleted with effect from April 1, 2019, and, therefore, the declaration of the contract on the
listing agreement thus becomes an event which was not a material event and does not materially
affect the price of the securities and, therefore, such information cannot be treated as UPSI.

It is also humbly submitted before the Hon’ble Court that in Re Emami Limited and Ors.4
(Emami Limited), the Adjudicating Officer accepted the contention that merely because an
event was listed under Reg 2(1)(n) does not mean such information is UPSI by default. The
materiality of its potential price impact must also be demonstrated.

It is humbly submitted before the court that other these conditions mentioned under regulation
2(1)(n) one of the essential requirements for proving the information as UPSI is the effect of
the information on the financials of the company when released. Here the information would
not affect the price since it is an ordinary course of business and the expected revenue pursuant
to the deal is only 1.3% of the total revenue of the company which would surely not affect the
prices of the company if the information is released, as it is a meagre amount of revenue.
Therefore, the present information is not UPSI as per reg 2(1)(n)5 of PIT Regulations.

[A.2] INFORMATION WAS GENERALLY AVAILABLE TO THE PUBLIC.

The information regarding the deal between Bockhardt and Moon Pharma is generally
available to the public via the news channels. As per the facts of the case, the information
regarding the contract between Bockhardt and the Moon pharma was already there. By mid-
November, there were speculations in the market that Bockhardt has rejected Tibbott’s bid and
was going ahead with the Moon Pharma.6 Therefore, this information was clearly not
unpublished sensitive information since it was already present in the market.

It is humbly submitted before the court that information that is ‘generally available’ to the
public does not constitute UPSI. This information doesn’t necessarily have to be published and
can be from a source other than the company – so long as the information is generally available

2
Rupesh Kantilal Savla v SEBI, 2021 SCC OnLine SAT 23.
3
SEBI (Prohibition of Insider Trading) Regulations, 2015, reg 2(1)(n)(vi).
4
In Re Emami Limited and Ors, 2022 SCC OnLine SEBI 37.
5
SEBI (Prohibition of Insider Trading) Regulations, 2015, reg 2(1)(n).
6
Moot Proposition, ¶ 5.

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to the public, it no longer qualifies as ‘unpublished’ information, provided however the

information is accessible on a non-discriminatory basis. The information regarding the deal
between Moon pharma and Bookhardt was available to general through precise speculations in
the market, not published though. But as it was available to the public it won’t be considered
as UPSI.

In the case of J.C. Mansukhani v SEBI7 it was held that in cases where the UPSI is subsequently
published, or where news reports have been broadcasted about the information, authorities
analyse price fluctuations immediately before and after the publication of information to
determine whether it was price sensitive or not. Here, in the present case, the deal was signed
on 24th December 2021. The price was fluctuating a lot before signing the deal. On 22nd
December the high price was 951.25 then it dropped to 878.80 on 23rd December which was a
huge fluctuation. Again, on 24th December price fluctuated and shoot up to 950.45, here the
price was fluctuating on a daily basis and noting could be proved that the price was fluctuating
because of the signing of the deal.8

The news reports by financial newspapers like Economic Times, containing specific, precise,
and comprehensive facts of the UPSI can be considered as evidence of publication of UPSI. In
Re: Trading in the scrip of Moons Technologies Limited9, SEBI held that the newspaper article
in question was not speculative because it contained precise facts with respect to the show
cause notice (which was the UPSI). Here also there was speculations regarding the information
and the agreement between the Bockhardt and the Moon Pharma.10

Therefore, the information was generally available and was not a UPSI.

[A.3] DEAL WAS IN THE ORDINARY COURSE OF COMPANY’S BUSINESS.

The deal between Bockhardt and Moon pharma was undertaken in the ordinary course of the
company’s business and hence was not going to affect the prices of the company. The revenue
generated out of this deal is only 1.3% of the total revenue of the company’s FY’21. This is
meagre revenue which would not affect the company’s stocks and if the information about the
same is relevant then could not be considered price sensitive since the amount of revenue

7
J C Manusukhani v Securities and Exchange Board of India, 2021 SCC OnLine SAT 757.
8
Moot Proposition, ¶ 6.
9
In Re: Trading in the scrip of Moons Technologies Ltd, 2018 SCC OnLine SEBI 193.
10
Moot Proposition, ¶ 5.

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obtained from the deal would not influence anyone to invest or disinvest in the stocks of Moon
Pharma.

In Gujarat NRE Mineral Resources Ltd. v SEBI11, it was held that information about an
investment company acquiring coal mining leases by selling a part of its investments was not
price sensitive, since earning income by buying and selling securities was the normal activity
of an investment company. Not every such transaction would have a material impact on the
price of its securities. In the present case also, dealing with a foreign company for medicines
during the Alpha breakout in whole world was just a normal activity at that time and wouldn’t
affect the price of the company.

Similarly, if a manufacturing company bought raw materials or sold its products, this
information would be normal business activity and not price sensitive. Here in this case the
company has only sold its products that are medicines which is a normal course of business.
Therefore, the present information is not price-sensitive information.

Therefore, information only qualifies as UPSI when the monetary value of the transaction
crosses a certain threshold, i.e., when it is substantial enough (unlike normal business activities)
to impact the price of securities. Herein, the information doesn’t have much monetary influence
to impact the price of the securities since it is production only 1.3% of the company’s revenue.12
Therefore, this could be considered a normal course of business rather than trading in UPSI.

In a case involving mergers or acquisitions or entering into contracts for business activities, the
value of the deal relative to the total income of the company, its market capitalisation, and its
possible impact on the company's financials, are all important factors to ascertain the likely
price impact of the information pertaining to the deal.13 The price impact in the present deal
between Bockhardt and Moon Pharma deal is meagre. It is only working towards the health of
the world wherein the revenue is not the prime focus. Therefore, the information and agreement
are not affecting the price to any great extent. It is just 1.3% of the total price and therefore not
a price sensitive information.14

11
Gujarat NRE Mineral Resources Ltd v Securities and Exchange Board of India, 2011 SCC OnLine SAT 186.
12
Moot Proposition, ¶ 12.
13
J C Mansukhani v Securities and Exchange Board of India, 2019 SCC OnLine SAT 91.
14
Moot Proposition, ¶ 12.

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Furthermore, the underlying facts and circumstances do not support an ex-parte ad interim
order because it would have serious repercussions for a large publicly traded company like
Moon Pharma and because the violation in this instance has not even been proven.

ISSUE B: WHETHER THE FACTS OF THE MATTER WARRANTED PASSING OF AN EX PARTE AD

INTERIM ORDER AND WHETHER SBP HAS EXERCISED ITS POWERS WITHIN THE CONFINES OF

THE LAW OF LAND?

It is most humbly submitted before this hon’ble court that the facts of the matter don’t warrant
the passing of an ex parte ad interim order because [B.1] urgency cannot be established; [B.2]
there is an absence of circumstantial evidence; and [B.3] there is a violation of principles of
Natural Justice.

[B.1] URGENCY CANNOT BE ESTABLISHED.

The ex parte ad interim orders are generally passed in cases of urgency to protect the public
interests. There is no doubt that the respondent has a right to pass an ex-parte order but such
ex-parte orders are required to be passed in case of extreme urgency as has been held in North
End Foods Marketing Pvt. Ltd. v SEBI15 and in SEBI v Udayant Malhoutra16.

In this instance, there was no such urgency, and even then, the order was issued without
consulting the opposing party. Hence this order is not based on any reasonable justification and
the facts of the case didn’t warrant the passing of any ex-parte ad interim order. The SBP has
exercised its jurisdiction out of its power.

The SAT has held that the SEBI can pass ex parte interim orders only in extreme and urgent
cases. An ex-parte order is when there is no notice or any opportunity to be heard by the other
party during the first court appearance. The Tribunal has held that the power to issue such
orders must be used very sparingly.17

The Supreme Court had observed that the urgency must be infused by a host of circumstances,
viz. large-scale misuse and attempts to monopolize or corner the market. 18 Here, there are no

15
North End Foods Marketing Pvt Ltd v SEBI, 2019 SCC OnLine SAT 6.
16
SEBI v Udayant Malhoutra, (2021) 1 SCC 219.
17
Cameo Corporate Services Ltd v Securities and Exchange Board of India, 2019 SCC OnLine SAT 249.
18
Liberty Oil Mills & Ors v Union of India & Ors, AIR (1984) SC 1271.

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 UNIVERSITY MOOT COURT SELECTION, 2022

such circumstances which proves that there has been therefore there is no emergency arising
in this case and that’s why the order passed was according to the facts of the case.

Ultimately, the objective of passing such orders is to curb further mischief and restore
confidence in the capital market. SEBI’s enforcement mechanism and monitoring of trades in
the securities market plays a very important role in taking action.

Therefore, not just ‘timing’ but also ‘reasonable justification’ is an important aspect when SEBI
passes ex-parte interim order. SEBI is empowered to pass ex-parte interim orders only in
extremely urgent cases and such power should be exercised sparingly.19 In this case, neither
timings nor reasonable justification has been taken into account. The ex parte order has been
passed so early that the other side has not even been given a chance to represent their arguments
once and also it was passed only on inferences and without any strong evidence. Therefore,
this order is void since the facts of this case don’t demand the passing of such an order.

Therefore, in the present case, there was no urgency for the SBP whole-time member to
exercise its (ex parte) powers. There is no extreme urgent situation that warranted SBP to pass
an ex parte ad interim order. The impugned order is not sustainable as it was passed in gross
violation of principles of natural justice.

[B.2] ABSENCE OF CIRCUMSTANTIAL EVIDENCE.

It is humbly submitted before the court that here in the present case the basis of urgency was
purely on account of presumption and was not based on any piece of evidence. There should
be some shred of evidence to come to a prima-facie conclusion that the appellants are indulging
in insider trading and releasing UPSI with a manipulative intent to manipulate the price.

The orders against Jane and Darcy were passed on the mere inference that they talked about
the insider information on the call on 28th October 2021.20 They don’t have a call recording of
that day and inferred it.21 And also, in the case of Moon Pharma and Mr. Bennett they didn’t
have any strong evidence that they acted in violation of PIT regulations. Therefore, the passing
of the ex parte ad interim order is not valid in this case and the SBP has exercised its power out
of the law of the land.

19
SEBI v Udayant Malhoutra, (2021) 1 SCC 219.
20
Moot Proposition, ¶ 17.
21
Moot Proposition, ¶ 13.

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The discrepancies pointed out by SBP did not reveal that the appellant (Darcy and Jane &
Moon pharma and Mr. Bennett) made any gain by this wrongful transfer, nor was there any
finding of a loss being caused to an investor. In this light, restraining the appellants from
carrying out their business appears to be harsh and unwarranted.

Passing a restraint order which virtually puts a stoppage on the appellant’s right to trade under
Art. 19 of the Indian constitution based on a needle of suspicion is harsh and unwarranted. 22
An interim order, however temporary it may be, restraining an entity/person from pursuing his
profession/trade may have substantial and serious consequences which cannot be compensated
in terms of money.23 Therefore, the passing of such an order also violates Article 19 of the
Indian Constitution and hence is out of the law of the land.

In the matter of trading in Mentha oil contract at multi commodity exchange of India, SAT
observed that although SEBI was empowered to take measures “as it deemed fit” for investor
protection under Sec. 11A24 & 11B25, “it does not mean that in every case, an ex parte interim
order should be passed on the pretext that it was imminent to pass such an interim order to
protect the interests of the investor or securities market.” Sec. 11A & 11B has been the most
abused in SEBI as it is open-ended.

In the case of SEBI v Udayant Malhoutra26, SAT held that ex parte orders should be passed
sparingly and with appropriate reasoning and the same cannot be issued merely based on
possibilities. SAT opined that before the issuance of an ex-parte order, SEBI should have
evidence to inter alia demonstrate that a notice would remove a property or would dispose of
the same or that the notice would obstruct the proceedings, or that he would delay the
proceedings pursuant a show-cause notice. Only if there is an element of urgency in the matter
which must be based on evidence and not merely on a possibility that the notice may try to
defeat the realization of the final order. Passing ex-parte orders where it is not warranted may
disproportionately and irreparably harm the interest (including financial and reputational) of
notices.

Therefore, in this case, too there is no evidence that appellants entered into such practices and
therefore this order should be set aside by SAT.

22
Gautam Thapar & Ors v SEBI, 2020 SCC OnLine SAT 435.
23
Sanjay Gupta v SEBI, 2020 SCC OnLine SAT 88.
24
SEBI (Prohibition of Insider Trading) Regulations, 2015, s 11A.
25
SEBI (Prohibition of Insider Trading) Regulations, 2015, s 11B.
26
SEBI v Udayant Malhoutra, (2021) 1 SCC 219.

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Under the 1993 SEBI Regulations, any contravention of the provisions of the SEBI Act, Rules,
Regulations, etc. would be dealt with by the provisions of Chapter V of the Intermediaries
Regulations of 200827. Reg 2728 provides for suspension, cancellation, etc. only after the
submission of a report made by the inquiry officer and after the appellant is allowed to be heard.
Herein this case no such opportunity was granted in the present case. Therefore, it violates the
law of land.

It is also humbly submitted before the court that emergency powers like section 11A & 11B of
SEBI Regulation Act, 199229 are not unheard of. Even preventive detention of a person
(impeding his constitutional right to move about the nation) has been upheld as constitutional
but always subject to stringent safeguards. An economic equivalent of such detention, equally,
ought to be subject to serious safeguards, and such powers should be used more as an exception
to deal with exceptional cases, rather than as a norm, to be used routinely in all cases. Such
power should be used in the rarest of rare cases, and the regulator should demonstrate what
harm would be caused to its regulatory constituency but for such intervention. But SPB has
been using these emergency powers as a norm rather than emergency provisions. Therefore,
some restrictions must be applied on its power and SAT should set aside the Ex Parte ad interim
order in this case.

[B.3] VIOLATION OF NATURAL JUSTICE.

It is humbly submitted before the court that the passing of an ex parte ad interim order is against
the law of the land since it doesn’t take into consideration the principles of natural justice. It
violates the principle of Audi alteram partem which is hearing both sides. The tribunal passed
on order without hearing the other side and hence acted outside the confines of the law of the
land.

An ex-parte ad-interim order could not be passed by an arbitral tribunal without providing
sufficient notice, and subsequently hearing the parties concerned. The Court observed that the
arbitral tribunal may be of the view that some urgent orders need to be passed to protect the
interests of the parties, however, procedural fairness would not permit the tribunal to pass an
ex-parte ad-interim order without having heard the disputants.30

27
Securities and Exchange Board of India (Intermediaries) Regulations 2008, ch V.
28
SEBI (Prohibition of Insider Trading) Regulations, 2015, reg 27.
29
SEBI (Prohibition of Insider Trading) Regulations, 2015, s 11A.
30
Godrej Properties Ltd v Goldbricks Infrastructure Pvt Ltd, 2021 SCC OnLine Bom 3448.

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Therefore, SPB acted outside the confines of the law and the case’s facts didn’t warrant the
passing of the ex Parte ad interim order.

ISSUE C: WHETHER SBP’S REFUSAL TO PROVIDE THE INFORMATION & DOCUMENTS, AS

SOUGHT BY DARCY AND JANE, IS IN ACCORDANCE WITH THE PRINCIPLES OF NATURAL

JUSTICE?

It is humbly submitted before the court that the SBP’s refusal to provide the information and
documents, as sought by Darcy and Jane is against the principles of natural justice because
[C.1] it violates the principle of Audi Alterum Partem under the principle of natural justice;
[C.2] violates Art. 14; and [C.3] violates Art. 21.

[C.1] VIOLATION OF THE PRINCIPLE OF AUDI ALTERUM PARTUM.

In the case of Maneka Gandhi v Union of India31, the SC discussed in detail the various aspects
of the rule of natural justice. There are two norms that a decision-making body must follow;
Audi alteram partem which means that the person concerned must be heard before a decision
is taken, and the second principle is Nemo judex in causa sua which means a person will not
judge a case in which he is himself interested. Recently a third principle has also been added it
says that the decision must give reasons.

Herein the principle of Audi alteram partem is not followed. Therefore, the order of the
appellate court was not in line with this principle and hence void.

This doctrine of Audi alteram partem is a code of procedure and hence covers every stage
through which administrative decision-making passes. The laws made by God and man allow
the party to defend himself, thus, a person who is facing charges must be allowed to be heard
before any decision is passed against him.32 Herein, this principle is not followed since SBP
refused Darcy and Jane to provide the documents and information sought by them to defend
them fairly in the court proceeding. Therefore, it would be a violation of this principle if the
order will be given without providing an adequate chance to Darcy and Jane to prove their
innocence and in which case the judgment will be void as per the principles of natural justice.

It is humbly submitted before the court that in the case of Ridge v Baldwin33 it was stated that
the principles of natural justice apply to ‘almost the whole range of administrative powers.

31
Maneka Gandhi v Union of India, (1978) 1 SCC 248.
32
Cooper v Wands worth Board of Works, (1863) 143 ER 414.
33
Ridge v Baldwin, (1963) 2 WLR 935.

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Here in the present case the SBP is an administrative power and therefore this rule is applicable
against the SBP as well.

[C.1.1] Darcy and Jane have Right to know evidence

It is submitted before the hon’ble court that this rule of fair hearing includes some essentials in
it. One of them is the disclosure of information and documents to the other party or the right to
know the evidence.

These right states that every person before an administrative authority exercising adjudicatory
powers has the right to know the evidence to be used against him so that he/she has a fair trial
and fair opportunity to present himself before the court.34 If the person doesn’t know what is
going to be used against him then the other party will have an edge against him and the
proceedings wouldn’t be considered as fair as per the principles of natural justice. This
principle was firmly established in Dhaksheshwari Cotton mills v CIT35. In this case, the
appellate income tax tribunal did not disclose the information supplied to it by the Department.
The Supreme Court held that there was not given a fair hearing.

In the case of State of Orissa v Binapani36 it was held that the evidence must be placed before
another party for his comments and rebuttal, but if the evidence is used without disclosing it to
the affected or another party then it would be against the rule of fair hearing.

In this case too, the relevant information and documents are not being supplied to Jane and
Darcy which is violating their right to know evidence under Audi alteram partem principle and
the opportunity to prove them innocent. A fair and equal ground has not been provided to both
parties. Therefore, the court must provide the documents and information sought by Darcy and
Jane to avoid a miscarriage of justice.

The failure to conform to the principles of natural justice would make a judicial or quasi-
judicial order void, and such an order cannot be validated by the appellate or revisional orders.37

It is humbly submitted before the court that there are many income tax cases where it has been
said that the documents on which the Department relies must be disclosed to the other party.
What is more, the Department should disclose to the other parties, not just the documents on

34
T Takano v SEBI & Anr, 2022 SCC OnLine SC 210.
35
Dhaksheshwari Cotton Mills v CIT, AIR 1955 SC 154.
36
State of Orissa v Binapani, 1967 SCR (2) 625.
37
Ponkunnam Traders v Addl ITO, 1972 83 ITR 508 Ker.

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which it relies but all relevant documents on which it may be able to rely. So, from the right to
be heard, one travels to the right to disclosure of documents because without such documents
a proper representation cannot be made.

In the case of Suraj Mall Mohta and Co. v A. V. Visvanatha Sastri38, the Supreme Court held
that an assessee has a right to inspect the record and all relevant documents before he is called
upon to lead evidence in rebuttal. This right has not been taken away by any express provision
of the Income Tax Act.

In Sahara India (Firm) v. CIT39 the SC held that unless a statutory provision either specifically
or by necessary implication excludes the application of principles of natural justice because in
that event the Court would not ignore the legislative mandate, the requirement of giving
reasonable opportunity of being heard before an order is made, is generally read into the
provisions of a statute, particularly when the order has adverse civil consequences for the party
affected. In case of conflict between a statutory provision and natural justice, the former should
prevail. But where there is no such exclusion in the statute, the application of the principles can
be assumed in cases where in the exercise of administrative jurisdiction the rights of citizens
are affected by their prejudice.40

Herein no statutory provision is against the principle of natural justice in the PTI regulations;
therefore, principles of natural justice have to be followed in this scenario.

In I.E. Vittal v Appropriate Authority & Ors.41, where a decision is based upon a document in
a proceeding, a copy of the same should be provided to the affected party. Otherwise, it would
violate the principles of natural justice as the opportunity of being heard should be an effective
opportunity and not an empty formality. Denial of opportunity may make an order void.

Therefore, Darcy and jane must be provided with the relevant document and information as
sought them.

[C.1.2] The right to rebut adverse evidence

The right to rebut adverse evidence presupposes that the person has been informed about the
evidence against him. In the present case, Darcy and Jane are not provided with the documents

38
Suraj Mall Mohta and Co v A V Visvanatha Sastri, AIR 1954 SC 545.
39
Sahara India (Firm) v CIT, (2008) 14 SCC 151.
40
Asiatic Oxygen Ltd v STO, [1982] Tax LR (NOC) 200 (Ori).
41
I E Vittal v Appropriate Authority & Ors, 1996 (3) ALT 707.

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and information about the evidence against them hence this right to rebut adverse evidence is
being violated.42 Therefore, they must be given the right to seek the documents so that they can
utilize their right to rebut adverse evidence.

[C.1.3] Deprivation of property

It is humbly submitted before the Hon’ble court that the rule of Audi alteram partem is attracted
when the impugned order is shown to have deprived a person of his liberty or his property.
Herein if the documents and information are not provided to Darcy and Jane it would amount
to deprivation of property and therefore the principles of natural justice will be violated.
Therefore, they must be provided with the documents and information.

[C.2] VIOLATION OF ART. 14.

All persons in similar circumstances shall be treated alike both in privileges and liabilities
imposed. Art. 1443 manifests in the form of the following propositions:

1. A law conferring unguided and unrestricted power on authority is bad for being arbitrary
and discriminatory.

2. Art. 14 illegalize discrimination in the actual exercise of any discretionary power.

3. Art. 14 strikes at arbitrariness in administrative action and ensures fairness and equality of
treatment.

The Supreme Court has extracted from Art. 14 the principle that natural justice is an integral
part of the administrative process. Art. 14 guarantees a right of hearing to the person adversely
affected by administrative order.

In Delhi Transport Corporation v. DTC Mazdoor Union44, SC held that “the Audi alteram
partem rule, in essence, enforces the equality clause in Art 14 and it applies not only to quasi-
judicial bodies but also to administrative order adversely affecting the party in question unless
the rule has been excluded by the Act in question.”

Similarly, SC opined that Art 14 is an authority for the proposition that the principles of natural
justice are an integral part of the guarantee of equality assured by Art. 14 an order depriving a

42
Moot Proposition, ¶ 17.
43
The Indian Constitution, Art 14.
44
Delhi Transport Corporation v DTC Mazdoor Union, AIR 1991 SC 101.

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person of his civil right passed without affording him an opportunity of being heard suffers
from the vice of violation of natural justice.45

Therefore, by denying the right to provide relevant documents and information to Darcy and
Jane not only principle of natural justice is being violated but their fundamental right to equality
is being violated too.

The SPB will have a greater edge since it would have all the evidence against them and Darcy
and Jane would not be provided with a fair chance to trial which would be a violation of Article
14. Therefore, to protect the fundamental right of equality for Darcy and Jane, they must be
provided with the information and documents related to the case.

[C.3] VIOLATION OF ART. 21.

In Maneka Gandhi v Union of India46, SC by realizing the implications of Gopalan during the
1975 emergency took a ‘U-turn’ and held that Art 2147 would no longer mean that law could
prescribe some semblance of the procedure however arbitrary or fanciful, to deprive a person
of his liberty. It now means that the procedure must satisfy certain requisites in the sense of
being fair and reasonable. The procedure “cannot be arbitrary, unfair or unreasonable”.

Providing one party with more information than the other is an arbitrary, unfair, and
unreasonable procedure and therefore it is a violation of art 21 as well as principles of natural
justice.

ISSUE D: WHETHER THE TRADES UNDERTAKEN BY DARCY WERE IN VIOLATION OF THE PIT
REGULATIONS?

The counsel humbly submits before this Hon’ble court that the trades undertaken by Darcy
were not in violation of PIT Regulations because [D.1] Darcy is not an insider under PIT
Regulations; [D.2] circumstantial evidence shows no possession of UPSI; [D.3] telephonic
communication does not amount to insider communication; and [D.4] No profits made by
Darcy can be attributed to UPSI.

45
Maneka Gandhi v Union of India, (1978) 1 SCC 248.
46
Maneka Gandhi v Union of India, (1978) 1 SCC 248.
47
The Indian Constitution, Art 21.

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[D.1] DARCY IN NOT AN INSIDER UNDER PIT REGULATIONS.

Regulation 2(1)(g)48 of the PIT Regulations defines an 'insider' as any person who is:

a. a connected person; or

b. in possession of or having access to UPSI

Reg. 2(1)(d)(ii)49 of the Insider Trading Regulation provides the categories of persons which
shall be considered to be deemed connected persons.

Any person who is associated with a company directly or indirectly or has been associated with
the company during the six (06) months before the concerned act.

Such person is associated with the company in any capacity including:

1. because of time-to-time communication with its officers; or

2. by involving in any contractual, fiduciary, employment relationship; or

3. by being a director; or

4. by being an employee of the company; or

5. holds any relationship either professional or business, between himself and the
company.

Darcy is not the connected person in the present case with regards to the Reg. 2(1)(d)(ii) of the
Insider Trading Regulation.

Darcy is not associated with the company he has worked with Moon Pharma from 2015-202050
so, he is also not associated with the company during the six (06) months before the concerned
act.

Darcy and Jane were in touch and talk/meet occasionally because they were also avid sports
enthusiast and share common WhatsApp groups for discussions and leisure betting during live
cricket matches.51

SBP overlooked the fact that Darcy and Jane's communication consisted solely of sports talk.

48
SEBI (Prohibition of Insider Trading) Regulations, 2015, reg 2(1)(g).
49
SEBI (Prohibition of Insider Trading) Regulations, 2015, reg 2(1)(d)(ii).
50
Moot Proposition, ¶ 7.
51
Moot Proposition, ¶ 7.

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the Supreme Court, in the case of Balram Garg v SEBI52 also observed that the PIT Regulations
provided that the onus of proving that persons who were not connected persons were in
possession of, or had access to, UPSI was on SEBI.53

However, in the present case of the Appellant there was no direct evidence to establish if
anyone had disclosed the UPSI to the Darcy. SBP had simply proceeded on the assumption that
the Darcy had access to UPSI by virtue of their relationship to the Jane. SBP had, therefore,
failed to establish this requirement of proof.

[D.2] CIRCUMSTANTIAL EVIDENCE SHOWING NO POSSESSION OF UPSI.

TRADING PATTERN OF THE DARCY

DATE SCRIP ACTION PRICE PER NO. OF

SHARE SHARES
October 05, PIPLA Purchase 56 10000
2021 Pharma
October 15, Palmbook Inc. Sell 599 50000
2021
October 29, Moonpharma Purchase 829 10000
2021
October 30, Moonpharma Purchase 831 20000
2021
October 29, Zen TV Sell 323 50000
2021
October 31, Moon pharma Purchase 831 20000
2021
December 19, Zen TV Sell 340 50000
2021
December 20, Tibbott Sell 680 5000
2021

PHASE 1- He purchased Moon pharma’s stock on October 29, 2021

52
Balram Garg v SEBI, 2022 SCC OnLine SC 472.
53
Ganesh Prasad and Sanjay Khan, ‘Insider Trading Regulations in India: A Comparative and Critical Analysis
of SEBI's 2015 PIT Regulations’ GNLU L. Rev. 4 (2013): 109.

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PHASE 2- Purchased Moon Pharma’s stock on October 30, 2021

PHASE 3- Purchased Moon Pharma’s stock on October 31, 2021

PHASE 4- Sale of Moon Pharma’s share on December 24, 2021. He also sold mutual fund
units held by him in the FBI Pharma Scheme of the FBI Pharma Focus Mutual Fund, whose
50% of total assets under management were securities of Moon Pharma.54

He purchased these stocks 1 month prior to the Public Announcement of the Deal between
Moon Pharma and Bockhardt.55 The share price of the Company continued to stable during this
period. The decisions to sell the shares of the Company were purely personal and commercial
in nature, and nothing more could be imputed from these decisions.56

The Court further opined that an offence of 'communication or procurement' of UPSI can only
be established through the production of cogent materials. While perusing through the call data
which were not recordings of Darcy, SPB found several calls between Jane and Darcy during
the months of October to December, including a 5-minute call on October 28, 2021, at 8 PM.57
The facts of the present case states that Darcy and Jane are also avid sports enthusiast and share
common WhatsApp groups for discussions and leisure betting during live cricket matches.
Both of them closely follow the yearly Pindian Premier League (“PPL”) which was starting
from September 2021. PPL’s playoffs were scheduled in the last week of October 2021.58
During the 5-minute call they had a discussion about PPL.

Section 6 of the Indian Evidence Act59 which incorporates Doctrine Res Gestae which talks
about facts forming the part of same transaction lays down that there should be a proximate
nexus between the events to prove at all. The discussions between Darcy and Jane and the
subsequent events which are completely different very unambiguously exhibit that no possible
insider information was ever exchanged between anyone cannot simply presume that
communication occurred based on the alleged proximity between the parties.

The Supreme Court in Balram Garg v SEBI60 held that even where a presumption is drawn, it
must be on the basis of established foundational facts and circumstances. In the present case,

54
Moot Proposition, ¶ 5.
55
Moot Proposition, ¶ 8.
56
Moot Proposition, ¶ 17.
57
Moot Proposition, ¶ 13.
58
Moot Proposition, ¶ 7.
59
Indian Evidence Act, 1872, s 6.
60
Balram Garg v SEBI, 2022 SCC OnLine SC 472.

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SBP failed to produce any material on record to establish the communication or procurement
of UPSI by the Darcy, or that he was a 'connected persons'. Consequently, in absence of these
essential foundational facts and circumstances, a presumption of communication of UPSI by
the Jane to Darcy could not be established.

[D.3] TELEPHONIC COMMUNICATION DID NOT AMOUNT TO INSIDER COMMUNICATION.

It is humbly submitted that the telephonic conversation between Darcy and Jane was in general
in nature and no UPSI was disclosed or shared amongst the two, as the discussion was merely
restricted to Sports (PPL).

The above-mentioned conversation between Darcy and Jane does not fall within the ambit of
“price sensitive information” under S.2(ha)61 of the SEBI regulations on Prohibition of Insiders
Trading Act, 1992, which include:

i. financial results of the company.

ii. Intended declaration of Dividends.

iii. Issue of shares by way of public rights, bonus, etc.

iv. Any major expansion plans or execution of new projects.

v. Amalgamation, mergers and takeovers.

vi. Disposal of the whole or substantial of the undertaking.

vii. significant changes in policies, plans or operations of the company.

Therefore, the conversation between the two could not have possibly amounted to disclosure
of the price sensitive information, as no further discussion took place between the two after
that point of time.

To substantiate the above preposition, reference may be made to the case of SEC v Texas Gulf
Sulphur Co.62 where it was discussed that it is important to determine (i) when the information
in question became material as it is to determine (ii) whether the information was material.
With reference to the above Texas Gulf Sulphur Case, the answer to both the tests is negative.

61
SEBI (Prohibition of Insider Trading) Regulations, 2015, s 2(ha).
62
SEC v Texas Gulf Sulphur Co, 2 ALR Fed 190.

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Telephonic conversation as previously discussed was not material or immaterial in nature as

far as insiders trading is concerned.

The telephonic conversation was pertaining to “PPL”. This information is not a non-public
information, as it is generally available to the investing public. For that matter, even the price
sensitive information should be unpublished in order to constitute insider trading as per reg 3
of SEBI (Prohibition of Insider Trading Regulations) 199263.

Therefore, in light of the above-mentioned proposition it is most humbly prayed the court to
consider the materiality of information which was discussed which was the discussion on the
PPL.

[D.4] SINCE DARCY DID NOT ACT ON THE SAID INFORMATION, HE DID NOT MAKE PROFIT.

It is humbly submitted before the court that Darcy did not act on the said information, as
previously discussed. Apart from the non-material telephonic conversation, no further
discussion was done.

The SAT in Rakesh Agarwal v SEBI64, It is pertinent to highlight the relevant ratio decidendi
which is read as, “looking from the gravty of the charge and penal consequnces that could visit
the insider for indulging in indider trading, it is difficult to accept the preposition that the
intention or motive of the person indulging in insider trading is irrelevant. It is true that
regulation 3 and 4 per se are sections without specific mention of the requirement of motive or
the intention but these regulations, if read with the objective of Prohibiting the insider trading
makes clear that motive is built in and the insider trading without establishing the motive factor
is not punishable.”

From the above extract it is unambiguous that motive and intention also attains importance if
the guilt is to be established. Furthermore, under the facts and circumstances of the instant case
Darcy and Jane merely had a conversation about PPL, if there had been any conclusive
conversation with Darcy or leak of any material information, Darcy would have only
purchased Moon Pharma’s shared as the price of the Target company’s stock generally
increases during the announcement of the deal between Moon Pharma and Bockhardt and
healthcare sectors were at their peak and stock prices of the listed companies in these sectors

63
SEBI (Prohibition of Insider Trading) Regulations, 2015, reg 3.
64
Rakesh Agarwal v SEBI, (2004) 49 SCL 351 (SAT).

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continued to move upwards in spite of general downturn in the indices and considerable loss
of value in other blue-chip stocks.65

However, in the case of Rajiv B Gandhi v SEBl66 and Chandrakala v SEBI67, the Court held
that the trades executed should be motivated by the information in possession of the insider,
thereby highlighting the importance of intention or mens rea, though the burden of negating
the fact of not trading in securities on the basis of UPSI is on the insider.68

All the above-mentioned facts direct towards an absence of any evidence in support of the
charges on Darcy, therefore, Darcy’s trading practice should not be considered as violative of
PIT Regulations.

65
Moot Proposition, ¶ 3.
66
Rajiv B Gandhi v SEBl, 2020 SCC OnLine SAT 14.
67
Chandrakala v SEBI, 2021 SCC OnLine SAT 1905.
68
Prateek Bhattacharya, ‘India's Insider Trading Regime: How Connected Are You?’ NYUJL & Bus. 16 (2019):
1.

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 UNIVERSITY MOOT COURT SELECTION, 2022

PRAYER

In the light of the facts of the case, issues raised, arguments advanced & authorities cited, the
Counsels for Appellant humbly prays before the Hon’ble Securities Appellate Tribunal of
Pindia to kindly adjudge & declare that:

-I-

The information and agreements pertaining to the deal between Moon Pharma & Bockhardt
was not UPSI in terms of the PIT Regulations.

-II-

The facts of the matter don’t warrant the passing of an ex parte ad interim order and SPB has
not exercised its powers within the confines of law of land.

-III-

SPB’s refusal to provide the information & documents, as sought by Darcy and Jane, is
violative of principle of Natural Justice.

-IV-

Trades undertaken by Darcy were in violation of the PIT Regulations.

& To further pass any other order that the Hon’ble Supreme Court of Downton may deem fit.
& For this kindness, the Counsels on behalf of Appellant, as duty bound shall forever pray.

RESPECTFULLY SUBMITTED

COUNSELS FOR THE APPELLANT

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