Team Code: T-37

UNIVERSITY MOOT COURT SELECTIONS GRAND INTRA, 2022

Before

THE SECURITIES APPELLATE TRIBUNAL, PINDIA

APPEAL NO. 202/2022 FILED U/S 15T OF SECURITIES ACT, 1992

MOON PHARMA & M R.

BENNETT............................................................................APPELLANT

VERSUS

SECURITY BOARD OF

PINDIA................................................................................RESPONDENT

CLUBBED WITH

APPEAL NO. 317/2022 FILED U/S 15T OF SECURITIES ACT, 1992

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

VERSUS

SECURITY BOARD OF PINDIA...............................................................................RESPONDENT

MEMORIAL for RESPONDENT

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TABLE OF CONTENTS

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TABLE OF CONTENTS

Table of Contents........................................................................................................................I

Index of Authorities.................................................................................................................III

LIST OF ABBReviations.........................................................................................................IV

Statement of Jurisdiction.........................................................................................................VI

Statement of Facts..................................................................................................................VII

Issues Raised.........................................................................................................................VIII

Summary of Arguments...........................................................................................................IX

Arguments Advanced.................................................................................................................1

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INDEX OF AUTHORITIES

Table of Contents.......................................................................................................................3

Index of Authorities...................................................................................................................5

LIST OF ABBReviations...........................................................................................................6

Statement of Jurisdiction............................................................................................................8

Statement of Facts......................................................................................................................9

Issues Raised............................................................................................................................10

Summary of Arguments...........................................................................................................11

Arguments Advanced...............................................................................................................12

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LIST OF ABBREVIATIONS

ABBREVIATION EXPANSION

¶ Paragraph

AIR All India Records

AO Adjudication officer

art Article

ors others

PIT Prevention of Insider Trading

PPL Pindian Premier league

r Regulation

s section

SAT Securities Appellate Tribunal

SBP Securities Board of Pindia

SC Supreme Court

SCC Supreme Court Cases

SCR Supreme Court Records

SEBI Securities Exchange Board of India

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STATEMENT OF JURISDICTION

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STATEMENT OF FACTS

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ISSUES RAISED

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SUMMARY OF ARGUMENTS

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ARGUMENTS ADVANCED

A: THE INFORMATION AND AGREEMENTS PERTAINING TO THE DEAL

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

¶1. It is humbly submitted that the information and agreements pertaining to the deal between
Moon Pharma and Bockhardt was Unpublished Price Sensitive Information in terms of the
Prohibition of Insider Trading Regulations, 2015. In this argument, it is further contended on
the behalf of SEBI that, firstly, Moon Pharma violated the Regulation 2(1)(n) of the PIT
Regulations; and secondly, the metric “Delta” proves that the said agreement was UPSI.

I. Moon Pharma violated the Regulation 2(1)(n) of the PIT Regulations

¶2. It is relevant to note the definition of “unpublished price sensitive information” as given
under Regulation 2(1)(n) of PIT Regulations: “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 including but not restricted to,
information relating to the following:—regulations 2(1)(n)(i) financial results; 2(1)(n)(iv)
mergers, de-mergers, acquisitions, de-listings, disposals and expansion of business and such
other transactions; 2(1)(n)(vi) material events in accordance with the listing agreement. 1
Thus, from the aforesaid definition of unpublished price sensitive information, it is observed
that the following three ingredients are essential to qualify an information as an unpublished
price sensitive information:
1.1. The information must be directly or indirectly related to a company or its
securities;
1.2. The information must not be generally available;
1.3. The information upon becoming generally available, is likely to materially affect
the price of the securities.2
¶3. With regards to the first criteria, the deal between Moon pharma and Bockhardt was the
information directly relating to the securities as the agreement entered between Moon Pharma
and Bockhardt will lead to the expansion of the business of Moon Pharma beyond the area of
1
Prohibition of Insider Trading Regulations, 2015.
2
Zee Entertainment Enterprises Ltd. In re 2021 SCC OnLine SEBI 199.
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expertise, and is covered under the ambits of regulation 2(n)(iv) of the PITRegulations, 2015 3
and hence come under the umbrella of UPSI.4
¶4. And the expansion of the business of Moon Pharma has a major impact on the revenue of
the company, as expected revenue of the Moon Pharma pursuant to deal was 800 cr., 5 as well
by becoming generally available, prima facie it has affected the price of the securities. Thus,
any investment or trading carried out based on that information before it gets acknowledged
by the stock exchange or becomes known to the public, will be considered as UPSI6.
¶5. As per regulation `2(1)(e) of PIT Regulations: “generally available information” means
information that is accessible to the public on a non-discriminatory basis” 7 However, in the
instant case the deal was done behind closed doors, and is known only to few people until its
official Public Announcement on December 24, 2021 8. Albeit the alleged insider trading, by
Darcy, was done in October 2021. Additionally, it is a known fact that this information was
not published either on the listed companies’ website or on the stock exchange’s website.
Also, the speculations do not count as UPSI or generally available information, as the market
normally reacts to news disseminated by a company and thus the information about the
financial results of a company has a major impact on the decision-making of the traders and
investors and thus it is UPSI.9
10
¶6. In, Poonam Garg v. Securities and Exchange Board of India, the securities and
exchange board held that it is an undisputed fact that the information regarding financial
results until made known to the public is Unpublished Price Sensitive Information. Similar
observations were made in Manoj Gaur v. Securities and Exchange Board of India, 11 the
matter of Kushal Ltd.12
¶7. The report of the High-Level Committee to Review the SEBI (PROHIBITION OF
INSIDER TRADING) REGULATIONS 1992, under the Chairmanship of N.K Sodhi has also
submitted that any information when made public, is likely to affect the price of the shares
and the decision of the shareholders will be termed as UPSI. UPSI is essential information
that is not generally available which, on becoming generally available, would materially

3
Prohibition of Insider Trading Regulations 2015, s 2(n)(iv).
4
Vikramaditya Chandra, In re, 2020 SCC OnLine SEBI 208.
5
Moot Proposition 5.
6
DCB Bank Ltd., In re, 2021 SCC OnLine SEBI 1096.
7
Prohibition of Insider Trading Regulations 2015, s 2(1)(e).
8
Harish K Vaid v Adjudicating Officer, Securities and Exchange Board of India 2012 SCC OnLine SAT 174.
9
Arun Jain, In re, 2018 SCC OnLine SEBI 86.
10
Poonam Garg v Securities and Exchange Board of India 2018 SCC OnLine SAT 99.
11
Manoj Gaur v Securities and Exchange Board of India 2012 SCC OnLine SAT 176.
12
Kushal Ltd., In re, 2022 SCC OnLine SEBI 94.
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affect the price of securities to which it relates. The Committee decided to define the concept
of “generally available information” and lay down the principle of how general availability
should be ascertained. Essentially, information that is accessible to the public on a non-
discriminatory basis would be considered generally available information.
¶8. In the aforementioned case, as per table 2 13 it is noted that the price of the scrip increased
by 36.45 on the next day of announcement in comparison to December 24, 2021 on close-to-
close basis. Nifty during that time had increased by 3% 14. Moreover, the number of shares
traded also increased by 28 lakhs, thus it is observed that the public announcement of the
deal, upon becoming generally available has prima facie materially affected the price of the
securities of moon pharma. To make some information material enough to call it UPSI, two
of the many criteria to establish the same is to see whether there is the establishment of any
new business or the expansion of the existing business15.

II. The metric “Delta” proves that the said agreement was UPSI16

¶9. In order to prove that said Agreement was indeed a UPSI, we’ll use a metric called
“Delta” that is widely used by the market and the traders to monitor their overall net position
across all their trades/positions.17 For example, if the insider thinks that the share price will go
up, then the net Delta of his positions will be positive, say 1,00,000, and this means that for
every Rs. 1 increase in the share price, the insider will make an approximate profit of Rs.
1,00,000/-. But if his view goes wrong, and the share price goes down, then for every Rs 1
fall in the share price, he will make an approximate loss of Rs 1,00,000.
¶10. As can be seen above, the cost of the view going wrong is as high as the benefit of the
view being right. Thus, when an insider runs a high Delta, [either (+) or (-)] it shows that he
is very confident about his view. Particularly when his Delta in that share is compared with
the Delta he runs in other shares (if he is a regular trader) OR with the Delta he runs in the
same share when he does NOT have UPSI. So, this metric can help us determine how
confident Darcy was, of his trades in Moon Pharma compared to other trades that he invested
in. As seen in the table 2:18

13
Moot Proposition, tab 2.
14
Moot Clarification 17.
15
B. Renganathan v. Securities and Exchange Board of India 2021 SCC OnLine SAT 96.
16
Vikramaditya Chandra, In re, 2020 SCC OnLine SEBI 208.
17
<www.investopedia.com/terms/d/delta.asp#:~:text=Investopedia%20%2F%20Mira%20Norian,What%20Is
%20Delta%3F,ratio%20to%20become%20delta%20neutral> accessed 14 September 2022.
18
Moot Proposition, tab 2.
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DATE SCRIP ACTION PRICE PER NO. OF SHARES

SHARE

October 05, 2021 PIPLA Pharma Purchase 56 10000

October 15, 2021 Palmbook Inc. Sell 599 50000

October 29, 2021 Moonpharma Purchase 829 10000

October 30, 2021 Moonpharma Purchase 831 20000

October 29, 2021 Zen TV Sell 323 50000

October 31, 2021 Moonpharma Purchase 831 20000

December 19, 2021 Zen TV Sell 340 50000

December 20, 2021 Tibbott Sell 680 5000

¶11. He made unusual Confident Trades in the scrip of Moon Pharma in which he had never
traded before. The following table will further help us in analysing Darcy’s trades:

DATE OPENING CLOSING LOW HIGH VOLUME

PRICE PRICE PRICE PRICE TRADED (IN
LAKHS)

December 21, 2021 842.95 842.95 824 899.40 238

December 22, 2021 834.40 943.55 821.95 951.25 301

December 23, 2021 878.80 870.80 789.75 878.80 236

December 24, 2021 928 931 865.25 950.45 349

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December 25, 2021 939.80 978.70 917 986.90 377

In total, Darcy had bought 50,000 shares of Moon Pharma in the month of October, 2021
worth Rs 24,930,831 (829*10000 + 831*20000 + 831*20000). After the announcement of
the deal the price of the stocks went rocket high in the market and Darcy in total made profit
worth Rs 57.2 lakhs. We can observe high positive DELTA in the confident trades of Darcy.
This can only be done when in possession of UPSI.
¶12. Insiders may try to defend themselves saying that if they had UPSI, they would try to
maximise their profits and not enter into contrary trades. However, such contrary trades may
be entered into-
i. Precisely to camouflage their main trades.
ii. In order to execute their main trades, they need funds either to buy or furnish margins.
Thus, to generate funds, they may enter into contrary trade. In the instant case, the appellants
not only bought moon Pharma, but also 10000 PIPLA Pharma shares, at a low price of 56 per
share, which acts as a camouflage for their main trade. Additionally, the appellants also sold
great units of other shares, such as 50,000 Palmbook Inc shares at 599 per share, 50,000
shares of Zen TV at 323 per share, etc., following which they purchased moon Pharma
shares. Such a pattern of selling shares indicates an attempt to generate funds for the main
trade, i.e., moon Pharma shares.
¶13. As stated above, the information and agreements pertaining to the deal between Moon
Pharma and Bockhardt was UPSI as per the Regulation 2(n)(i) of the PIT Regulations and the
matric of Delta, as it materially affects the price of the securities on becoming generally
available.

B: THAT THE FACTS OF THE MATTER WARRANTED PASSING OF AN EX

PARTE AD INTERIM ORDER AND SPB HAS EXERCISED ITS POWERS
WITHIN THE CONFINES OF LAW OF LAND

¶14. It is humbly submitted before the SAT that the facts of the case warranted passing of an
ex parte ad interim order and SPB has exercised its power within the laws of the land, firstly,
SPB has adequate powers to pass ex-parte interim orders under section 11and section 11B of
the SEBI Act 1992; secondly, the order passed by SBP by exercising its powers is within the
confines of law of land.
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I. SBP has adequate powers to pass ex-parte interim orders under Section
11and Section 11b of the SEBI Act 1992.

¶15. Subject to the provisions of SEBI Act, it shall be the duty of SEBI to protect the interests
of investors in securities and to promote the development of, and to regulate the securities
market, by such measures as it thinks fit.
¶16.Section 11B of the SEBI Act relates to ‘Powers to issue directions and levy penalty’. 19
According to the said provisions, save as otherwise provided in section 11 of SEBI Act (i.e.,
except, but, other than), if after making or causing to be made an enquiry, SEBI is satisfied
that it is necessary:
(i) In the interest of investors, or orderly development of securities market; or (ii) To prevent
the affairs of any intermediary or other persons (as referred to in section 12 of SEBI Act 20)
being conducted in a manner detrimental to the interest of investors or securities market; or
(iii) To secure the proper management of any such intermediary or person, SEBI may issue
such directions:
a) To any person or class of persons (as referred to in section 12 of SEBI Act), or
associated with the securities market; or
b) To any company in respect of matters specified in section 11A of SEBI Act 21, as may
be appropriate in the interests of investors in securities and the securities market.
¶17. Here in the present matter, in the above contentions, it has been proved that the
information regarding the Jane has disseminated the information about the deal to Darcy and
following this Darcy took advantage of his situation and traded accordingly from which he
made lots of profit. The SPB did not put a blanket ban on the Moon Pharma and Jane and
Darcy, it banned them till further orders only. It means there was a chance that it could have
reverted its decision or let them go. It cannot be said to be done in a hastily way as thorough
investigation has been done by SPB regarding this matter.
¶18. SEBI can take such measure in the interest of investors and to regulate the securities
market after conducting any fact-finding exercise, whether one calls it ‘investigation’ or
‘enquiry’. The natural corollary of this is that initiation of formal ‘investigation’ as
contemplated under Section 11C or ‘enquiry’ in terms of SEBI (Enquiry) Regulations and/or
SEBI (Adjudication) Rules is not a “sine qua non” for exercising powers under Section 11,

19
Securities and Exchange Board of India Act, s 11B.
20
Securities and Exchange Board of India Act, s 12.
21
Securities and Exchange Board of India Act, s 11A.
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11B.22 Even if the investigation is still going on, SPB can still pass an interim order as
Hon'ble SAT in Karvy Stock Broking Ltd. v. SEBI has held as under: “the word “inquiry”
used in section 11(4) refers to the inquiries held under sections 11, 11 B, also to the enquiry
under the inquiry regulations framed under section 12(3) and also to the inquiry held under
Chapter VI A and it is during the pendency of any of these inquiries that an interim order
could be passed with a view to protect the interests of investors or in the interest of market.” 23
¶19. In the case of Zee Entertainment Enterprises Ltd. It has been held as under “pending
detailed examination, effective and expeditious preventive action is required to be taken by
way of ad interim ex–parte order to protect the interests of investors and preserve the safety
and integrity of the securities market. Such action needs to be taken to prevent any further
harm to investors”.
¶20. It also noted as under “Since the conduct of the aforementioned Noticees, do not, prima
facie, appear to be in the interest of investors and the securities market, necessary action has
to be taken against them immediately, else it may lead to loss of investors’ trust in the
securities market. The insider trading activity not only causes notional monetary loss to
investors but also has the effect of interfering with the development of securities market, as
investor tend to lose faith in the securities market. The same is detrimental to the
development of the securities market and qualifies as an “irreparable injury. The objective of
SEBI as enshrined in the SEBI Act is not only the protection of investors but also orderly
development of securities market”. If we consider the present case, Darcy has violated the
regulations of SEBI Act, 1992 and gained unfair profits from the trade. It is the duty of the
SPB to stop these activities and build up the trust of other investors in the market.
II. The order passed by SBP by exercising its powers is within the confines of
law of land.

¶21.The order passed by SPB prohibiting Darcy and Jane from accessing securities market
securities market and dealing in securities of any listed companies till further orders is within
the confines of law of land.
¶22. The prohibition does not violate article 19(1)(g) of India 24 which states, “All citizen
shall have the right to practise any profession, or to carry on any occupation, trade or

22
BLB Ltd. In re (Vacation of Ad-Interim Order) 2007 SCC OnLine SEBI 124
23
Karvy Stock Broking Ltd. v SEBI 2021 SCC OnLine Bom 8079.
24
Constitution of India 1950, art 19(1)(g).
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business.” In Anand Rathi v. Securities and Exchange Board of India25 (Anand Rathi)
Hon’ble Bombay High court held that restriction imposed by SEBI on petitioners regarding
trading in securities market is justified for following reasons:
 Firstly, SEBI's order and the need for the same was directed not against any particular
security or in respect of the extent or volume of transactions but against the
petitioner’s personal involvement in the securities market in general. The question is
not whether the petitioners should be permitted to trade in any particular scrip but
whether in public interest they should be permitted to trade at all pending
investigation into the allegations.
 Secondly, this very question would involve weighing the nature of the allegations the
extent of the petitioner’s involvement and, most importantly the element of public
interest.
¶23. SBP has a legislative mandate to maintain integrity of securities market and in
furtherance of same, it has powers to pass orders under sections 26 11 and 11B. To explain the
relevance of its power under these provisions it is pertinent to refer to Para 18 of Anand Rathi
judgement that states, “While considering the question as to whether the SEBI has authority
of law under sections and 11B to order interim suspension, we have to bear in mind that SEBI
is invested with statutory powers to regulate securities market with the object of ensuring
investors protection, orderly and healthy growth of securities market so as to make SEBI's
control, over the capital market to be effective and meaningful. It cannot be gainsaid that
SEBI has to regulate speculative market and in case of speculative market varied situations
may arise and looking into the exigencies and requirements, it has been entrusted with the
duty and functions to take such measures as it thinks fit. Section 11B is an enabling provision
enacted to empower the SEBI Board to requlate securities market in order to protect the
interest of the investors. Such an enabling provision must be so construed as to subserve the
purpose for which it has been enacted.”
¶24. There is a distinction between blanket order prohibiting indefinitely and barring only
until allegations levelled, are cleared off. This distinction is well explained by Lord Denning
in Lewis v. Heffer and ors27., “There is a distinction between the suspensions which are
inflicted by way of punishment, as for instance, when a member of the Bar is suspended

25
Anand Rathi v Securities and Exchange Board of India (SEBI) 2001 SCC OnLine Bom 381.
26
Securities and Exchange Board of India Act, s 11, 11B.
27
Lewis v Heffer and ors (1978) 3 All E.R. 354.
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for six months or when a solicitor is suspended from practice. But they do not apply to
suspensions which are made, as a holding operation, pending enquiries. Very often
irregularities are disclosed in a government department or in a business house; and a man
may be suspended on full pay pending enquiries. Suspicion may rest on him; and so, he is
suspended until he is cleared of it.”
¶25. Acts of Darcy and Jane weaken the public trust and investors’ confidence in securities
market. Public Interest factors in while passing such ad interim order when prima facie
findings adequately indicate indulgence of parties in Insider trading for unjust enrichment.
Hence, for reasons of public interest Jane and Darcy must be barred from trading in securities
market until all the allegations levelled on them are cleared off.

C: SPB’S REFUSAL TO PROVIDE THE INFORMATION & DOCUMENTS, AS

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

¶26. It is humbly submitted before the SAT that the request to provide the documents
requested by Darcy and Jane was not unheard by SPB and this does not go against the
principles of Natural Justice, firstly, ‘Nemo judex in causa sua’. No one should be made a
judge in his own cause, and the rule against bias; secondly, ‘Audi alteram partem’ means to
hear the other party, or no one should be condemned unheard; thirdly, it was in the interest of
other investors.
I. ‘Nemo judex in causa sua’, no one should be made a judge in his own cause,
and the rule against bias.

¶27. Nemo Judex In Causa Sua signifies rule against bias. This is the first principle of natural
justice that states no individual should be a judge in his own cause, or a deciding power must
be neutral and impartial when examining any case. “No one should be a judge in his own
case” since it directs to the rule of biases. Bias signifies an act that leads to an unfair job,
whether in an unconscious or conscious phase about a specific case or the party. Hence, this
rule reinforces impartiality in a judge impartially and ensures that the judgement delivered is
solely based on the evidence available for a case.
¶28. In this present scenario, The Securities Board of Pindia (“SBP”) got an alert about the
trading activities of moon pharma.28 Following this, Darcy and Jane were summoned by SBP

28
Moot Proposition Para 10.
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on multiple occasions and their statements were recorded. 29 After some preliminary
investigation, SPB barred Darcy and Jane from trading with companies and also asked Darcy
to disgorge the sum of 1.57 crores.30
¶29. It was obvious on the side of SPB that it was not the judge in its own case. They got an
alert and they conducted a thorough investigation regarding this matter. SPB summoned the
compliance officer and also asked for certain documents as part of its investigation. 31 In fact,
Darcy and Jane were summoned by SBP on multiple occasions and their statements were
recorded.32 This proves that it was a detailed investigation on the side of SPB. The US
District Court's order in United States of America v. Raj Rajaratnam 33: “Such inference taken
from the immediate and proximate facts and circumstances surrounding the events is
reasonable and logical which any prudent man would arrive at such a conclusion.” The
Supreme Court in SEBI vs. Kanhaiyalal Patel held that an inferential conclusion from proved
and admitted facts would be permissible and legally justified so long as the same is
reasonable.34 The abovementioned proposition has been followed by the SAT in Navin
Kumar Tayal & Anr. Vs SEBI in order dated 02.08.2021 in Appeal No. 08 of 2018.35
¶30. The Court in the case of Chintalapati Srinivasa Raju 36 where it is held that “a reasonable
expectation to be in the know of things can only be based on reasonable inference drawn
from foundational facts”. It is intended that a connected person is one who has a connection
with the company that is expected to put him in possession of unpublished price sensitive
information. Immediate relatives and other categories of persons specified above are also
presumed to be connected persons. It is mentioned that SBP was also informed by Moon
Pharma that Jane was involved in the discussions pertaining to financials of the deal and was
aware of the nitty gritty of the deal.37 It is clear from the facts and circumstances that Jane
directed the information about the deal to Darcy and that’s why he went ahead and traded the
shares.

II. ‘Audi alteram partem’ means to hear the other party, or no one should be
condemned unheard

29
Moot Proposition Para 11.
30
Moot Proposition Para 13.
31
Moot proposition Para 10.
32
Moot proposition Para 11.
33
United States of America v Raj Rajaratnam and Danielle Chiesi 09 Cr 1184 (RJH).
34
Kanaiyalal Baldevbhai Patel v Securities and Exchange Board of India 2019 SCC OnLine SAT 187.
35
Navin Kumar Tayal & Anr. v SEBI 2021 SCC OnLine SAT 104.
36
Satyam Computer Services Ltd. In re (Insider Trading) 2015 SCC OnLine SEBI 157.
37
Moot Proposition Para 12.
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¶31. It comprises three Latin words, which simply means that a person can receive
punishment or conviction without having a civil and fair chance of being heard. In simple
words, this rule states that both parties must have the chance to represent their viewpoints,
and authorities should conduct a fair trial accordingly. This is a significant rule of natural
justice as it prevents authorities from subjecting any individual to punishment without a
sound and valid ground. ¶ ¶32. The SPB here asked for the detailed list of events, minutes of
the meeting and all the persons who was involved in the matter. It conducted a deep
investigation and summoned the compliance officer of Moon Pharma as well.38
¶33. This is also called a rule of fair hearing. The constituents of fair hearing do not remain
fixed. It varies across authorities and cases. Darcy and Jane were summoned by the SPB and
their statement was recorded39 which proves that there was a fair hearing conducted by the
SPB.
¶34. The principle of natural justice has been followed and adopted to save public rights
against random arbitrary decisions by the administrative authority. Therefore, an individual
can easily see that the rule of natural justice includes the concept of fairness and honesty:
they stay alive and help to safeguard fair dealing. 40 The Honourable Supreme Court held in
the case of High Water that without giving a valid and reasonable ground you cannot
blacklist anyone and further he should be given a fair opportunity of being heard. 41 In certain
exceptional cases, the right to cross-examination can be denied or rejected. 42As it was stated
earlier, Darcy and Jane’s statements were recorded. They were given a fair opportunity of
being heard and the decision was not arbitrary. It was decided after a deep investigation into
the matter.

III. It was in the interest of other investors

¶35. It is humbly submitted before the SAT that the decision taken by the SPB was in the
interest of general public and investors. SPB refused to give certain documents to Darcy and
Jane on the basis of thorough investigation and considering the circumstances.
¶36. Section 11(1) of the SEBI Act, 43 provides that it shall be the duty of the Board to protect
the interests of investors in securities and to promote the development of, and to regulate the
38
Moot proposition Para 10.
39
Moot Proposition Para 11.
40
<https://byjus.com/free-ias-prep/principles-of-natural-justice/> accessed 15 September 2022.
41
Eurasian equipment and company limited v State of West Bengal 1975 AIR 266.
42
Hira Nath Mishra v The Principal Rajendra Medical College (1973) 1 SCC 805.

43
Securities and Exchange Board of India Act 1992, s 11(1).
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securities market, by such measures as it thinks fit. Here in this case, Darcy and Jane was
connected to each other. Ms. Jane was Darcy’s immediate junior in the business school. They
have kept in touch and talk/meet occasionally. 44 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.45 While Darcy has never traded in the stock of Moon Pharma and suddenly, he
got an interest in the shares of the company. He bought the shares of Moon Pharma on
October 29, October 30 and October 31.46 Considering all the circumstances, it cannot be said
that Jane did not communicate the information to Darcy. Ms. Jane contravened Regulation
3(1) of the PIT Regulations47 and Section 12A(c) of the SEBI Act 48, by communicating the
UPSI to the appellants in C.A. No. 7590 of 2021, by being an “insider” and “connected
person” within the meaning of PIT Regulations and by being privy to discussions and
communications pertaining to buy and withdrawal of shares of Moon Pharma. Additionally,
by virtue of being involved in the deal, Jane was in possession of the information. Even if
there was no evidence that the relatives had received any UPSI, SEBI could still succeed
against the relatives if SEBI could show that they were immediate relatives of the connected
persons.49 An important thing which needs to be taken into account that SEBI has been
authorized under securities law to protect investors interest and regulate public offer which
has its implication for public at large.50 It goes against the moral principles and also against
the rights of other investors. The SPB had to stop Darcy and Jane for manipulating the
securities market. All in all, the right to regulate must be exercised keeping in mind the
principles of fair and equitable treatment of the investors. 51 The SPB also has a responsibility
to extend all the support to the investors that are investing in the economy. The purpose and
object of the SEBI is to ensure that the markets are well-regulated and investors are not
cheated because of manipulation of the security market by a few unscrupulous investors who
for personal gain seek to destroy the sanctity of the security market.52 It is, therefore, apparent
that the measures to be adopted by the SEBI in carrying out its obligations are couched in
open-ended terms, having no prearranged limits. In other words, the extent of the nature and

44
Moot Proposition Para 7.
45
Moot proposition Para 13 (2).
46
Moot proposition Table 3.
47
Prohibition of Insider Trading Regulations 2015, r 3(1).
48
Securities and Exchange Board of India Act 1992, s 12A(c).
49
Balram Garg v Securities and Exchange Board of India 2021 SCC OnLine SAT 244.
50
Crowd Funding in India: Problems and Prospects, 4 KIIT Student L Rev 20 (2017).
51
Investor Interest v Public Interest: Striking a Balance 2021 SCC OnLine Blog Exp 21.
52
Indian Council of Investors v Union of India 2014 SCC OnLine Bom 4767.
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the manner of measures which can be adopted by the SEBI for giving effect to the functions
assigned to the SEBI, have been left to the discretion and wisdom of the SEBI. 53 Hence, it can
be said that SBP acted in accordance with the principles of Natural Justice.
D: THAT, THE TRADES UNDERTAKEN BY DARCY WERE IN VIOLATION OF
PIT REGULATIONS.

¶37. It is humbly submitted before the SAT that Darcy was in possession of UPSI and his
decision to trade in scrip of Moon Pharma was influenced by UPSI. In furtherance of its
action, the Respondent puts forth the following pleas in law: Firstly, Darcy was an “Insider”
and a “Connected Person”. Secondly, Darcy procured UPSI from Jane thereby violating
Regulation 3(2). Thirdly, Darcy’s decision to trade in scrip of moon pharma was influenced
by UPSI, in violation of Regulation 4(2).

I. Whether Darcy was an “insider” and a “connected person” in terms of the

PIT regulations

¶38. It is pertinent to refer to the relevant provisions/definitions of Connected Person and

Insider as mentioned in the PIT Regulations54.
 As per regulation 2(1)(d) of the PIT Regulations, “connected person” means,- “any
person who is or has during the six months prior to the concerned act been
associated with a company, directly or indirectly, in any capacity including by reason
of frequent communication with its officers or by being in any contractual, fiduciary
or employment relationship or by being a director, officer or an employee of the
company or holds any position including a professional or business relationship
between himself and the company whether temporary or permanent, that allows such
person, directly or indirectly, access to unpublished price sensitive information or is
reasonably expected to allow such access.”
 As per regulation 2(1)(g) of the PIT Regulations, “insider” means any person who is:
(a) a connected person (b) in possession of or having access to unpublished price
sensitive information.
¶39. As per these definitions Darcy can be termed as an “insider” and a “connected person”.
In line with regulation 2(1)(d), Darcy was directly or indirectly in frequent communication

53
Sahara India Real Estate Corporation Ltd. v Securities and Exchange Board of India [2012] 174 Comp Cas
154 (SC); (2013) 1 SCC 1.
54
Prohibition of Insider Trading Regulations 2015.
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with Jane, a senior employee of Moon Pharma. This communication or relationship was
reasonably expected to allow direct or indirect access to unpublished price sensitive
information. Similarly, Darcy was a connected person and was in possession of unpublished
price sensitive information. Hence it fulfils regulation 2(1)(g) of the PIT Regulations.

II. Darcy procured UPSI from Jane thereby violating regulation 3(2) of PIT
Regulations, 2015.

¶40. To establish violation of PIT regulation it must be proved that Darcy was in possession
of UPSI while trading in scrip of Moonpharma 55. The law constructs presumptions56
regarding access to price sensitive information based on a person’s structural or functional
relationship with the listed company and its management. The constraints faced in proving
facts that would only be within the knowledge of the delinquent parties would mean that a
prudent man’s estimate of the probabilities of a case can be inferred from several
determinative circumstances.57 Circumstantial evidence has long been considered as
admissible evidence to prove violation of securities laws58.
¶41. In present scenario, after SBP got an alert in its internal surveillance system 59, Darcy
and Jane were summoned by SBP because Jane, employed in Moonpharma was junior to
Darcy, and they have been interacting occasionally even after Darcy left Moonpharma. 60
Their discussion regarding PPL is merely incidental to their frequent interaction and they
are part of a whatsapp group for discussion during live matches.61
¶42. The point of law on inference and consideration of circumstantial evidence has been
decided by the Hon’ble Supreme Court of India. In SEBI v. Kishore R. Ajmera62, it was held
that the test for circumstantial inference is ‘preponderance of probabilities’ as opposed to
proof beyond reasonable doubt, it would always be that inferential process that a reasonable
or prudent man would adopt to arrive at a conclusion. It is the judicial duty to take note of the
immediate and proximate facts and circumstances surrounding the events on which the
allegations are founded, and to reach what would appear to the Court to be a reasonable

55
Prohibition of Insider Trading Regulations 2015, r 4(1).
56
Prohibition of Insider Trading Regulations 2015, r 2(1)(d).
57
Manoj Ganeriwala, In re (Unfair Trade Practice), 2007 SCC OnLine SEBI 9.
58
Insider Trading: Circumstantial Evidence is Evidence Enough?, 32.1 NLSI Rev 205 (2020).
59
Moot Proposition Para 10.
60
Moot Proposition Para 7.
61
Moot Proposition Para 7.
62
SEBI v Kishore R Ajmera (2016) 6 SCC 368.
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conclusion therefrom.63
¶43. The counsel on side of Respondent contends that Upon receiving information that Jane
was aware of nitty gritty64 of the deal between Moonpharma and Bockhardt, the WTM of
SBP rightly inferred communication of UPSI to Darcy by Jane and rightly relied upon
call logs to establish the same. Factors such as timing of discussion and trades, pattern of
trade becomes crucial to determine violation of Regulation 3(2) 65 that states “No person shall
procure from or cause the communication by any insider of unpublished price sensitive
information, relating to a company or securities listed or proposed to be listed, except in
furtherance of legitimate purposes, performance of duties or discharge of legal obligations”.
¶44. Now considering totality of facts, Darcy traded in scrip of Moonpharma on 29 th October
for the first time66, only next day after Darcy and Jane were involved in a 5-minute call at
around 8 pm on 28th October. To eliminate doubt of discussion regarding PPL, it must be
noted that they had Whatsapp groups for discussion during live cricket matches rather they
chose to discuss privately on a call. Further, Darcy purchased shares of Moonpharma for
three consecutive days from 28th-31st October, and sold all shares for profit on 24th December
for no reason67. Purchasing shares in large volume without any generally available
information such as financial results, acquisition and selling entire holding in a single day is
logically probative evidence.
¶45. Considering timing of trade and communication between Darcy and Jane leads to
conclusion that UPSI was communicated to Darcy. In V.K. Kaul v. Adjudicating officer,
SEBI68, it was held that when the totality of the evidence, even if only circumstantial,
reasonably points to the conclusion of guilt of the accused, the onus would be on the accused
to produce ‘direct evidence’ to rebut such inference of guilt. By virtue of this association and
frequent communication, Darcy is reasonably expected to have access to the UPSI of
Moonpharma at the relevant period. Therefore, as per the provisions of Regulations 69 2(1)(d)
(i) and 2(1)(g), Jane and Darcy are connected persons and consequently are insiders.

III. Darcy violated Regulation 4(1) of PIT Regulations while trading in posession

63
SEBI v Kishore R Ajmera (2016) 6 SCC 368.
64
Moot Proposition Para 12.
65
Prohibition of Insider Trading Regulations 2015, r 3(2).
66
Moot Proposition Para 8.
67
Moot Proposition Para 9.
68
V K Kaul v Adjudicating Officer, Securities and Exchange Board of India, 2012 SCC OnLine SAT 203.

69
Prohibition of Insider Trading Regulations 2015, r 4(1).
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of UPSI

¶46. The SEBI Act and the Regulations framed thereunder are intended to protect the
interests of investors in the Securities Market which has seen substantial growth in tune with
the parallel developments in the economy. Investors' confidence in the Securities Market is a
reflection of the effectiveness of the regulatory mechanism in force.70
¶47. To determine violation of Regulation 4(1)71 that states “No insider shall trade in
securities that are listed or proposed to be listed on a stock exchange when in possession of
unpublished price sensitive information”. It is already proved above that Darcy was an insider
under Regulation 2(1)(d)72. In Samir C. Arora v. SEBI73, it was held that it is not necessary
for SEBI to prove the case beyond reasonable doubt. To determine whether decision to trade
was influenced by UPSI, totality of facts and circumstances must be considered. The
observations made by SAT to determine foundational facts in Utsav Pathak v. Securities and
Exchange Board of India74, for conviction are satisfied by conduct of Darcy:

I. Darcy and Jane frequently interacted, and they were continuously in touch with
each other.
II. Darcy did not purchase any other shares, but only Moonpharma, after 28 th October
2021 to 20th December 202175, he started putting all his egg in one basket which is
highly abnormal behaviour for someone as experienced as him.
III. Purchase of large chunks of shares and selling it immediately after announcement
of agreement with Bockhardt without any plausible cause is suspicious.
¶48. From the aforesaid foundational facts, the circumstantial evidence or on a
preponderance of probability by a logical process of reasoning from the totality of the
attending facts and circumstances as stated aforesaid, an irresistible inference can be
drawn that the appellant had passed on the price sensitive information regarding the
agreement to the Darcy and the same was relied upon by him to trade in scrip of Moon
Pharma.
¶49. To further strengthen the claim of Darcy’s decision to trade on basis of UPSI

70
SEBI v Kishore R Ajmera (2016) 6 SCC 368
71
Prohibition of Insider Trading Regulations 2015, r 4(1).
72
Prohibition of Insider Trading Regulations 2015, r 2(1)(d).
73
Samir C Arora v Securities and Exchange Board of India 2004 SCC OnLine SAT 90.
74
Utsav Pathak v Securities and Exchange Board of India 2020 SCC OnLine SAT 63.
75
Moot Proposition tab 3.
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reference must be made to order of SEBI in Mrs Chandrakala v. Adjudicating officer76,

“We are also inclined to accept the argument of the learned counsel for the appellant that
where an entity is privy to unpublished price sensitive information it will tend to purchase
shares and not sell the shares prior to the unpublished price sensitive information
becoming public if the information is positive. A person who is in possession of
unpublished price sensitive information which, on becoming public is likely to cause a
positive impact on the price of the scrip, would only buy shares and would not sell the
shares before the unpublished price sensitive information becomes public and would
immediately offload the shares post the information becoming public.” Darcy’s trade
pattern leaves no doubt that his decision to trade was motivated by UPSI.

76
Mrs Chandrakala v Adjudicating officer Appeal No. 209 of 2011.
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PRAYER FOR RELIEF

Wherefore in the light of the facts of the case, issues raised, arguments advanced, and
authorities cited, may this Hon’ble Tribunal be pleased to adjudge and declare that:

A. THE INFORMATION AND AGREEMENTS PERTAINING TO THE DEAL BETWEEN MOON

PHARMA & BOCKHARDT WAS UPSI IN TERMS OF THE PIT REGULATIONS.

B. THE FACTS OF THE MATTER WARRANTED PASSING OF AN EX PARTE AD INTERIM

ORDER AND SPB HAS EXERCISED ITS POWERS WITHIN THE CONFINES OF LAW OF

LAND.

C. SPB’S REFUSAL TO PROVIDE THE INFORMATION & DOCUMENTS, AS SOUGHT BY

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

D. THE TRADES UNDERTAKEN BY DARCY WERE IN VIOLATION OF PIT REGULATIONS.

And/or

Pass any other order that it may deem fit in the interest of justice, equity, and
good conscience.

s/d

On behalf of Appellant/s

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