TEAM CODE - T38

UNIVERSITY MOOT SELECTION COMPETITION

TABLE OF CONTENTS
LIST OF ABBREVIATION
 INDEX OF AUTHORITIES

1.
STATEMENT OF JURISDICTION
 STATEMENT OF FACTS
1.Moon Pharmaceutical Limited (“Moon Pharma”) was incorporated on December 21, 1985, in the
country Pindia. Moon Pharma acquired the license to manufacture generic versions of three drugs
that are patented in developed countries. In 2020, a viral contagious disease caused by the
Alphavirus raged across the world. During this period, sectors such as information technology, FMCG,
and healthcare were at their peak and stock prices of the listed companies in these sectors continued
to move upwards despite the general downturn in the indices.

2.Bockhardt Limited is a listed company based out of the Union States. During the pandemic, It was
looking to import a newly patented cough and cold medicine from Pindia. As per the news in media,
the top pharmaceutical companies in Pindia were competing to get the contract from Bockhardt and
it seemed that the company was negotiating with multiple companies, in parallel. By mid-November
2021, there was speculation in market that Bockhardt had rejected Tibbott’s bid and was going
ahead with Moon Pharma. The companies entered into a definitive Licensing and Supply Agreement
early morning on December 24, 2021 at 0400 hours.

3.The expected revenue for Moon Pharma pursuant to the deal was around INR 800 Crores. 6. On the
same day at 1800 hours, Moon Pharma also announced its financial results for the half year ending
September 30, 2021. Mr. Darcy and Jane were from small college and had a good relationship. Darcy
has worked with Moon Pharma from 2015-2020. Thereafter, he joined Tibbott. Jane has been
working with Moon Pharma since 2017. Darcy and Jane have kept in touch and talk/meet
occasionally. They both were involved in Bockhardt deals from their respective company. He has an
active portfolio with over 23 stocks with aggregate value of Rs. 10 crores approximately.

4. The Securities Board of Pindia ,the regulator of securities market in Pindia got an alert in its
internal surveillance system, pursuant to which, it carried a detailed investigation into the trading
activities undertaken in the scrip of Moon Pharma during the period of September 1, 2021 and
December 30, 2021. It had stated investigation Moon Pharma.

5. On June 23, 2022, a Whole Time Member of SBP passed two ex parte ad interim orders stating
that the balance of convenience dictates that immediate action has to be taken against the entities
to prevent further harm to the investors and to the securities market.

6. SBP issued two orders after investigation. First order of SBP was the deal between Moon Pharma
and Bockhardt should have been considered as UPSI by Moon Pharma and by failing to identify it as
UPSI, the company and its compliance officer had acted in violation of the PIT Regulations.

The second order was prohibited Jane and Darcy from accessing securities market and dealing in
securities of any listed companies till further orders on the basis that Jane had communicated the
details of the Agreement to Darcy and the date on which the Agreement will be finally executed.
Darcy was also asked to disgorge a sum of INR 1.57 crores, being estimated profits made by Darcy
from the alleged wrongful trade in the scrip of Moon Pharma, within 15 days from the receipt of the
order.

7.Darcy and Jane requested for inspection of all documents that were referred to and relied upon by
SPB while issuing the order, including but not limited to: a. Call records available with SEBI;
b. All documents obtained from Moon Pharma; and,

c. Internal File notings of the surveillance team of SBP with respect to the case.

ISSUES FOR CONSIDERATION

A. Whether the information and agreements pertaining to the deal between Moon Pharma &
Bockhardt was UPSI in terms of the PIT Regulations?

B. Whether the facts of the matter warranted passing of an ex parte ad interim order and whether
SPB has exercised its powers within the confines of law of land?

C. Whether SPB’s refusal to provide the information & documents, as sought by Darcy and Jane, is in
accordance with the principles of natural justice?

D. Whether the trades undertaken by Darcy were in violation of the PIT Regulations?

SUMMARY OF AGRUEMENTS

A. Whether the information and agreements pertaining to the deal between Moon Pharma &
Bockhardt was UPSI in terms of the PIT Regulations?

It is brought before the Hon'ble Appellant Tribunal of Pindia that the information and
agreements pertaining to deal with Moon Pharma & Bockhardt was not in UPSI terms of the
PIT Regulations as obligations related to communication of UPSI and this agreemet is the
normal course of the company and comprise of just 1.45 percent of company profit of the
ear.

Whether the facts of the matter warranted passing of an ex parte ad interim order and whether SPB
has exercised its powers within the confines of law of land?

It is submitted 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, it is the humble
contention on behalf of the respondent that the SPB doesn’t violated principle of natural
justice, that the pre-decisional hearing by SEBI is mandatory.
 C. Whether SPB’s refusal to provide the information & documents, as sought by Darcy and
Jane, is in accordance with the principles of natural justice?

It is humble submitted before the Hon’ble court that the SPB’s refusal to provide the
information & documents, as sought by Darcy and Jane is in accordance with the principles
of natural justice as the principle of natural justice has not been violated and Regulators
should act fairly with doctrine of decisis is applicable stare in instant set of facts to provide
the documents asked by the appellants.

Argument Advanced

WHETHER THE INFORMATION AND AGREEMENTS PERTAINING TO DEAL

WITH MOON PHARMA & BOCKHARDT WAS UPSI IN TERMS OF THE PTI
REGULATIONS?

1. It is brought before the Hon'ble Appellant Tribunal of Pindia that the information
and agreements pertaining to deal with Moon Pharma & Bockhardt was not in
UPSI terms of the PIT Regulations as: [1.1] Obligations related to
communication of UPSI
2. Under Regulation 2(n) of the PIT Regulations, “unpublished price-sensitive
information” means any information, directly or indirectly, relating to a company
or its securities which is not generally available and which, once generally
available, is likely to have a substantial impact on the price of the securities and
normally includes, but not limited to, information relating to the inter-securities.1
3. Unpublished Price Sensitive Index (UPSI), on the other hand, includes decisions
taken by a company that has not been disclosed yet and can have a bearing on the
changes in the company’s stock prices. UPSI as under the SEBI (Prohibition of
Insider Trading) Regulations, 20152 includes information related to financial
results, dividends, change in capital structure, mergers, de-mergers, acquisitions,

1
SEBI (Prohibition of Insider Trading) Regulations, 2015
2
SEBI (Prohibition of Insider Trading) Regulations, 2015
 delisting, disposals, and expansion of business and such other transactions, and
changes in key managerial personnel.
4. In Hindustan Lever Limited (HLL) v. SEBI3 , it was alleged that HLL conducted
an insider trade by buying 800,000 shares of Brooke Bond Lipton India Limited
(BBLIL) from Unit Trust of India (UTI) before their merger was officially
published for the public. SEBI stated that HLL would be an insider as per
Regulation 2(e) as per the 1992 regulation which stated that an insider can be any
connected person or has access to such unpublished price-sensitive information.
5. The above case brought about certain changes in the 1992 amendment through the
2002 amendment. It includes the amendment of the definition of unpublished
under Section 2(k): “unpublished” means information that is not published by the
company or its agents and is not specific in nature.

[1.1]OBLIGATIONS RELATED TO COMMUNICATION OF UPSI

6. Regulation 3 of SEBI (PIT) Regulation 2015 deals with communication or

procurement of unpublished price sensitive information (UPSI). As per Regulation
3(1) of the SEBI (Prohibition of Insider Trading) Regulations, 2015, no insider
shall communicate, provide, or allow access to any unpublished price sensitive
information, relating to a company or securities listed or proposed to be
listed, to any person including other insiders except where such communication
is in furtherance of legitimate purposes, performance of duties or discharge of
legal obligations.
7. Speculative reports in print or electronic media shall not be considered as
published information. In another case, Shruti Vora v. SEBI4, also called the
WhatsApp leak case, 26 members of a group chat were investigated by SEBI for
insider trading. The investigation resulted in the seizure of over 190 documents
but the originator of the messages was not traced due to the WhatsApp privacy
policy. The arguments advanced by the appellants included “Heard on the Street”
which is often used by many stockbrokers.

3
(1986)
4
(L)no. 28 of 2020
Therefore, it is humbly submitted that the information and agreements pertaining to deal
with Moon Pharma & Bockhardt was UPSI in terms of the PIT Regulations.

ISSUE-2 WHETHER THE FACTS OF THE MATTER WARRANTED PASSING OF AN

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

1. It is submitted 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, it is the
humble contention on behalf of the respondent that, [1.1] SEBI doesn’t violated
principle of natural justice, that [2.1] pre-decisional hearing by SEBI is mandatory.

2. Ex-parte interim orders are made by regulatory authorities when there is urgency. In
Liberty Oil Mills & Ors. vs. Union of India & Ors. 5 the Supreme Court had observed
that the urgency must be infused by a host of circumstances, viz. large scale misuse
and attempts to monopolise or corner the market. Supreme Court further held that the
regulatory agency must move quickly in order to curb further mischief and to take
action immediately in order to in still and restore confidence in the capital market

[1.1] SEBI DOESN’T VIOLATED PRINCIPLE OF NATURAL JUSTICE WHILE

PASSING THE INTRIM ORDER.

3. It is most humbly submitted that in the instant case SEBI while issuing an ex-parte
order dated June 23, 2022, doesn,t violated principle of natural justice as Rule of
audi alteram partem means that a reasonable opportunity of being heard should be

5
AIR (1984) SC 1271
 given to the parties and in the instant case, the partiest are allowed to present before
the committee and put over there side infornt of the respondent.

{1.1.1} Rule of Audi Alteram Partem has been adhered to by SEBI.

4. The rule of audi alteram partem ensures that no one should be condemned unheard.
6
It is contended on behalf of the appellants that order passed without giving an
opportunity of pre- decisional hearing is a gross violation of principles of natural
justice7 as the rule of audi alteram partem is the soul of principle of natural justice. 8

5. The principle of audi alteram partem has been held to be a fundamental principle of
the rules of natural justice. This requires the maker of a decision to give prior notice
of the proposed decision to the persons affected and an opportunity to make a
representation. The exercise of a power which affects the rights of an individual must
be exercised in a manner which is fair and just and not arbitrary or capricious. 9

6. In Automotive Tyre Manufacturers Assn. v. Designated Authority,10 the Hon'ble

Supreme Court held that, "It is thus, well settled 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 which obviously cover infraction of property,
personal rights and material deprivations for the party affected."

6
Sangram Singh v. Election Tribunal, AIR 1955 SC 425 (India); Ashok Kumar Shankar v. Union of India,
(2007) 4 SCC 54 (India).
7
Krishna Pal Singh v. State of Uttarakhand, (2021) SCC OnLine Utt 491 (India).
8
Kanwar Amninder Singh v. High Court of Uttarakhand, (2021) SCC OnLine Utt 157 (India).
9
Jai Ram Yadav v. State of U.P., 2020 SCC OnLine All 1362 (India).
10
(2011) 2 SCC 258 (India).
 7. That a quasi-judicial order made without following the principles of natural justice is
void and nullity.11 The non-observance of natural justice is in itself prejudice to any
man and proof of prejudice independently proof of denial of natural justice is
unnecessary.12

8. As, SEBI has adequate powers to pass ex-parte interim orders under section 11 and
section 11B of the SEBI Act. Let’s discuss the powers of SEBI:

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. [section 11(1) of SEBI Act].

Section 11B of the SEBI Act relates to ‘Powers to issue directions and levy penalty’.
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

[2.1] PRE-DECISIONAL HEARING BY SEBI IS THE GENERAL RULE.

9. It is most humbly submitted that in the instant case, SEBI had passed an ex-parte
interim order and through the same interim order which 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. Thus, such an order was violative of the principles of
natural justice.

10. Regulation 10 of SEBI (PFUTP) Regulations also mandates that SEBI, after
consideration of the report referred in Regulation, if satisfied that there is a violation

11
A.R. Antulay v. R.S. Nayak, (1988) 2 SCC 602 (India).
12
F. L. Kapoor v. Jagmohan; AIR 1981 SC 136 (India).
 of these regulations and after giving a reasonable opportunity of hearing to the
persons concerned, issue such directions or take such action as mentioned in
Regulation 11 and 12. It is submitted that by analysing the said regulation, the term
direction or action shall include both interim and final orders.

{2.1.1} There was no urgency in the matter to dispense with pre-decisional hearing.

11. It is most humbly submitted that in the second proviso to Reg. 11 of SEBI (PFUTP)
Regulations, 2003, SEBI has been provided with the power to dispense with the
opportunity of pre-decisional hearing but the same has to be exercised only in
situations that demand extremely urgent proceedings.

12. It is argued that in absence of tearing hurry or urgency for the respondent to pass an
ex parte interim order, prohibited Moon Pharma from accessing capital markets and
raising funds till further orders and Mr. Bennett was prohibited from taking up a
directorship in any other listed entity till further orders for the appellants is harsh at
the ex-parte proceedings as the said allegations are being come into effect
immediately from June 23, 2022 and were to be in force until further orders.

13. In the case of North End Foods Marketing Pvt. Ltd. v. SEBI 13 it was held that,
"normally while passing an interim order, the principles of natural justice have to be
adhered to, namely, that an opportunity of being heard is required to be given."

14. It is argued that there was no real urgency in the matter to pass an ex-parte interim
order14 especially during the pandemic period. There is no doubt that SEBI has the

13
2019 SCC OnLine SAT 6 (India).
14
Rajeev Vasant Sheth v. SEBI, 2020 SCC OnLine SAT 463 (India).
 power to pass an interim order and that in extremely urgent cases 15 SEBI can pass an
ex-parte interim order but such powers can only be exercised sparingly 16 and only in
extreme17 urgent matters.18

{2.1.2} There were no reasons recorded by SEBI to dispense pre-decisional hearing.

15. That the rule requiring reasons to be given in support of an order is a basic principle
of natural justice which must inform the quasi-judicial process, which should be
observed in its proper spirit and “mere pretence of compliance with it would not
satisfy the requirements of the law.19

That, recording of reasons is a principle of natural justice and every judicial order must be
supported by reasons in writing. In S.N. Mukharjee v. UOI20 it was held that, "What is
necessary is that the reasons are clear and explicit so as to indicate that the authority has
given due consideration to the points in controversy." However, in the instant case, no
reasons were recorded in writing as to why no chance of pre-decisional hearing were
provided to the appellants.

ISSUE – 3 WHETHER SPB’S REFUSAL TO PROVIDE THE INFORMATION & DOCUMENTS, AS SOUGHT
BY DARCY AND JANE IS IN ACCORDANCE WITH THE PRINCIPLES OF NATURAL JUSTICE?

1. It is humble submitted before the Hon’ble court that the SPB’s refusal to provide the
information & documents, as sought by Darcy and Jane is in accordance with the principles
of natural justice as: [1.1] The principle of natural justice has not been violated [2.1]

15
Affluence Fincon Services Pvt. Ltd. v. SEBI, 2020 SCC OnLine SAT 402 (India).
16
Anugrah Stock & Broking Pvt. Ltd. v. National Stock Exchange of India Ltd., 2020 SCC OnLine SAT 351
(India).
17
Cameo Corporate Services Limited v. SEBI, 2019 SCC OnLine SAT 249 (India).
18
Udayant Malhoutra v. SEBI, 2020 SCC OnLine SAT 76 (India); SEBI v. Udayant Malhotra, (2021) 1 SCC 15
219 (India).
19
Siemens Engg & Mfg. v. Union of India, AIR 1976 SC 1785 (India).
20
1990 AIR 1984, 1990 SCR Supl. (1) 44
 Regulators should act fairly [3.1] doctrine of decisis is applicable stare in instant set of
facts to provide the documents asked by the appellants.

[1.1] THE PRINCIPLE OF NATURAL JUSTICE HAS NOT BEEN VIOLATED

2. It is most humbly contended that the denial 21 by SEBI to provide inspection and copies of all
documents and statements collected during the investigation is an utter violation of natural
justice22. A fair appreciation of evidences is necessary to abide by the principle of natural
justice23. The non-promoters must be given a fair opportunity to defend themselves by
providing them access24 all the documents and statements25 collected by SEBI. Any inquiry
that is to be conducted before issuing a direction in terms of Section 11 and 11B of the Act
must comply with the bare minimum principles of natural justice 26.

3. The Hon'ble Securities Appellate Tribunal in the matter of Shri B. Ramalinga Raju v. SEBI27,
ha held that "There can be no dispute that while determining the rights and obligations of
the parties the quasi-judicial authority must adhere to the principles of natural justice which
inter alia, includes the obligation to furnish requisite documents on the basis of which
charges are framed and permit cross-examination of the persons whose statements are
relied upon ...." Hence, non-grant of the documents asked by the appellants in the instant
case is a violation of the principles of natural justice as the documents may contain certain
information or evidence which can favour the appellants and denial of the same is fatal in
the lights of natural justice.

[2.1]REGULATORS SHOULD ACT FAIRLY

4. SEBI is a regulator and has a duty to act fairly, while conducting proceedings or initiating any
action against the parties. Being a quasi-judicial body, the constitutional mandate of SEBI is
to act fairly, in accordance with the rules prescribed by law. The role of a Regulator is to deal
with complaints and parties in a fair manner, and not to circumvent the rule of law for
getting successful convictions. There is a substantive duty on the Regulators to show fairness,
in the form of public cooperation.

21
New India Assurance Co. Ltd. v. Nusli Neville Wadia & Anr., AIR 2008 SC 876 (India).
22
Bharat Jayantilal Patel v. SEBI, 2010 SCC OnLine SAT 284 (India).
23
State of Mysore v. Shivabasappa AIR 1963 SC 375 (India).

24
Meenglas Tea Estate v. Workmen, AIR 1963 SC 1719 (India).
25
Bareilly Electric Supply Co. v. Workmen AIR 1972 SC 330 (India).

26
Price Waterhouse v. SEBI, 2011 SCC OnLine SAT 58 (India).
27
2017,SCC Online SAT 183(INDIA)
 5. Principles of natural justice - The duty to act fairly by SEBI, is inextricably tied with the
principles of natural justice, wherein a party cannot be condemned without having been
given an adequate opportunity to defend itself.

6. Fair Trial - The approach of SEBI, in failing to disclose the documents also raises concerns of
transparency and fair trial. Opaqueness only propagate prejudice and partiality. Opaqueness
is antithetical to transparency. It is of utmost importance that in a country grounded in the
Rule of Law, institutions ought to adopt procedures that further the democratic principles of
transparency and accountability. Principles of fairness and transparency of adjudicatory
proceedings are the cornerstone of the principles of open justice.

[3.1] DOCTRINE OF DECISIS IS APPLICABLE STARE IN INSTANT SET OF FACTS TO PROVIDE THE
DOCUMENTS ASKED BY THE APPELLANTS.

1. Article 14128 mandates every court subordinate to the Supreme court to accept the law laid
down by the Apex Court. All courts are bound to follow the decisions of the Supreme
Court29. The law declared by the Supreme Court is the law of the land and no Court or
Tribunal and for that matter, any other authority can ignore the law stated by the Supreme
Court. In order to maintain consistency in th,e It is pleaded system of justice, through
judicial pronouncements the courts have evolved the rule of precedents,the principle of
stare decisis etc30. Article 141 is an imprimatur to all courts that the law declared by
Supreme Court is binding on them31. the Supreme Court has held while adjudging a former
case that the SEBI is required to provide a notice with inspection and copies of all the
documents collected and statements recorded by it during the course of the investigation 32.
Hence, the aforesaid order by the Apex Court has to be mandatorily applied according to
the principle of stare decisis in the instant case.

ISSUE – 4. WHETHER THE TRADE UNDERTAKENS BY DARCY WERE IN VIOLATION OF THE PIT
REGULATIONS?

1. It is humble submitted before the hon’ble court that the trades undertaken by Darcy were not in
violation of the PIT Regulations as the Darcy provided all the required prompt, true, fair and
adequate disclosure of UPSI and therefore, not held liable for the act.

Regulation 2(c) of the Insider Trading Regulations defines connected person as any person who-

28
INDIA CONST. art.141
29
Gauraya v. S.N. Thakur, (1985) 1 SCC 260 (India).
30
B.S.G.S.S.T. Association v. Bihar Education Service Association, AIR 2013 SC 487 (India); Delhi Transport
31
State of Andhra Pradesh v. A.P. Jaiswal, (2001) 1 SCC 748 (India).
32
Price Waterhouse, supra note 39.
Is a director of a company, or is deemed to be a director of that company by virtue of section 307(10)
of the Companies Act, 1956 . Darcy and Jane were juniors in college and had also frequently met and
had a good connection with each other.

As per Regulation 2(1)(g) of PIT Regulations, “Insider” means any person who is:

(i) a connected person; or

(ii) in possession of or having access to unpublished price-sensitive information:

In accordance with this section, Darcy can be considered an insider.

2. Occupies the position as an officer or an employee of the company or holds a position

involving a professional or business relationship between himself and the company whether
temporary or permanent and who may reasonably be expected to have an access to UPSI in relation
to that company.

3. In the case of Samir C. Arora v. SEBI, the SEBI charged Samir Arora concerning insider trading
and barred him from the securities market for five (05) years. The Securities Appellate Tribunal
(“SAT”) set aside SEBI’s order and held that since the information was false, the prohibition of non-
disclosure under would not be attracted. SAT said that the information has to be true to constitute a
UPSI and to attract the provisions of insider trading. SEBI then appealed in the Supreme Court and
the Apex Court set aside SEBI’s appeal stating that Samir Arora was not trading during the period he
was banned from participating in the securities market .

4. Therefore, Darcy have not violated any PIT Regulations which required all prompt, true, fair
and adequate disclosure of UPSI and all the requirement have been delievered through Darcy.

Prayer