Supreme Court Declines To Interfere With SAT Order Clearing Biocon VP Of Insider Trading Charge

The Supreme Court has declined to interfere with a Securities Appellate Tribunal (SAT) ruling that exonerated Biocon Vice President Shreehas P. Tambe of insider trading allegations. The allegations arose from trades executed ahead of Biocon's proposed collaboration with Sandoz.

Tambe, who was Biocon's Vice President at the time of the trades, is currently the Chief Executive Officer and Managing Director of Biocon

By an order dated July 26, 2022, SAT partly allowed Tambe's appeal. It quashed the insider trading charge and set aside directions restraining him from accessing the securities market and associating with listed companies.

However, the Tribunal upheld a Rs. 1 lakh penalty for delayed disclosure of trades under Regulation 7(2)(a) of the SEBI (Prohibition of Insider Trading) Regulations, 2015.

A bench of Justices Sanjay Karol and Nongmeikapam Kotiswar Singh declined to interfere with the SAT order. The Court also clarified that the impugned judgment would not be treated as a binding precedent.

"In the attending facts and circumstances of the case, we are not inclined to interfere with the impugned judgment/order, clarifying that the same shall not be treated as a binding precedent. The present appeal is disposed of leaving the question of law open," the court held. 

The case stemmed from SEBI's investigation into trades preceding Biocon's January 18, 2018 announcement of a global collaboration with Sandoz.

SEBI alleged that Tambe, a key managerial personnel and insider, sold 17,440 shares between December 19 and December 27, 2017. According to SEBI, he executed the trades while in possession of unpublished price sensitive information (UPSI).

A Whole Time Member of SEBI imposed a three-month market ban on Tambe. The WTM also imposed a penalty of Rs. 2 lakh.

SAT held that the circumstances listed in the proviso to Regulation 4(1) of the PIT Regulations are illustrative and not exhaustive. It observed that an insider could establish innocence by relying on circumstances beyond those specifically mentioned in the proviso.

The tribunal noted that Tambe had obtained pre-clearance from the company. It also noted that the trading window remained open when the trades were executed.

Further, Tambe had entered into an agreement on December 16, 2017 to purchase a residential flat. SAT found that he used the sale proceeds from the shares to make part payment towards the purchase.

The tribunal concluded that the trades were bona fide. It held that they were not motivated by UPSI.

Accordingly, SAT had set aside the insider trading charge and the related restrictions. However, it retained the Rs. 1 lakh penalty for delayed disclosures.