The Supreme Court on August 11, 2026, restored the action taken by the Securities and Exchange Board of India (SEBI) against the promoters of Tara Jewels Limited for trading in the company’s shares while being in possession of unpublished price sensitive information (UPSI).
A Bench of Justice Sanjay Karol and Justice Nongmeikapam Kotiswar Singh allowed SEBI’s appeal and set aside the Securities Appellate Tribunal’s (SAT) decision that had earlier quashed the regulatory action. The Court, however, reduced the penalty imposed on Rajeev Vasant Sheth from Rs. 25 lakh to Rs. 10 lakh.
Background of the Case
Tara Jewels Limited was facing serious financial difficulties in 2017. The company recorded a net loss of Rs. 166.80 crore for the quarter ending September 2017, compared with a loss of Rs. 6.62 crore in the previous quarter. Its net sales also fell by around 69 percent.
During the UPSI period from October 2 to November 29, 2017, Rajeev Vasant Sheth sold a substantial portion of his shareholding. His daughters, Aarti Sheth and Divya Sheth, also sold their entire holdings. According to SEBI, the transactions resulted in an avoided loss of approximately Rs. 1.38 crore.
SEBI subsequently imposed market restrictions, disgorgement and monetary penalties. SAT later set aside that order, accepting the explanation that the company was at risk of being classified as a non-performing asset and finding that the sales could fall within the available defence under Regulation 4(1) of the 2015 Insider Trading Regulations.
Supreme Court’s Observation
The Supreme Court examined the scheme of the SEBI Act and the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015.
The Court noted that Regulation 4(1) creates a presumption that trades made while an insider possesses UPSI are motivated by that information. The regulation also permits an insider to establish innocence through specified circumstances. Importantly, the accompanying note states that the reasons for trading or the purpose for which the proceeds are used are not relevant once possession of UPSI and trading are established.
Applying this principle, the Bench observed that the respondents were admittedly in possession of UPSI and had sold substantial portions, or the entirety, of their holdings during that period.
“The fact that the respondents had indulged in the trades at the relevant point in time is sufficient to conclude that they had conducted insider trading,” the Court said, adding that “less or no profit, is of no consequence.”
The Court also clarified that the six defences listed under Regulation 4(1) are not exhaustive because the provision uses the word “including”. However, any additional defence must be of the same or similar nature as those specifically contemplated by the regulation.
Decision
The Supreme Court allowed SEBI’s appeal and restored the disgorgement order requiring the respondents to give up approximately Rs. 1.38 crore, representing the loss allegedly avoided through the transactions. The Court also upheld the penalties imposed for violation of the applicable code of conduct.
However, considering the overall facts, the Court found the Rs. 25 lakh penalty imposed on Rajeev Vasant Sheth under Section 15G excessive and reduced it to Rs. 10 lakh, the minimum penalty imposed on the other respondents.
The modified penalty was directed to be paid within three months, if not already paid.
Case Details
Case Title: Securities and Exchange Board of India v. Rajeev Vasant Sheth & Ors.
Case Number: Civil Appeal No. 4905 of 2022
Judge: Justice Sanjay Karol and Justice Nongmeikapam Kotiswar Singh
Decision Date: August 11, 2026
