UNIVERSITY MOOT COURT SELECTIONS, GRAND INTRA, 2022 TEAM CODE: T-17

COVER PAGE
UNIVERSITY MOOT COURT SELECTIONS, GRAND INTRA, 2022

Before,
SECURITIES APPELLATE TRIBUNAL

FILED U/S 15T OF THE SEBI ACT, 1992

(APPEAL NO. 202 OF 2022)

MOON PHARMA ………………………………………………………………...…..APPELLANT 1

MR. BENNETT………………………………………………………………………...APPELLANT 2
VERSUS
SBP……………………………………………………………………………………...RESPONDENT

CLUBBED WITH

(APPEAL NO. 317 OF 2022)

JANE……………...………………………………………………………………...…..APPELLANT 1
DARCY……….………………………………………………………………………...APPELLANT 2
VERSUS
SBP……………………………………………………………………………………...RESPONDENT

UPON SUBMISSION TO SECURITIES APPELLATE TRIBUNAL

MEMORIAL ON BEHALF OF APPELLANTS
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TABLE OF CONTENTS

COVER PAGE……..................................................................................................................I

TABLE OF CONTENTS........................................................................................................II

LIST OF ABBREVIATIONS...............................................................................................IV

INDEX OF AUTHORITIES..................................................................................................V

STATEMENT OF JURISDICTION................................................................................VIII

STATEMENT OF FACTS....................................................................................................IX

IDENTIFICATION OF ISSUES..........................................................................................XI

SUMMARY OF ARGUMENTS.........................................................................................XII

ARGUMENTS ADVANCED..................................................................................................1

ISSUE A: THE INFORMATION AND AGREEMENTS PERTAINING TO THE

DEAL BETWEEN MOON PHARMA & BOCKHARDT WAS NOT UPSI IN TERMS
OF PIT REGULATIONS........................................................................................................1

[A.1] THAT THE DEAL BETWEEN MOON PHARMA AND BOCKHARDT IS HIGHLY UNLIKELY

TO MATERIALLY AFFECT THE PRICE OF THE SECURITIES........................................................1

[A.2] THAT THE DEAL BETWEEN BOCKHARDT AND MOON PHARMA ISN’T MATERIAL AS

PER THE SEBI (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS,

2015........................................................................................................................................2

ISSUE B: THE FACTS OF THE MATTER DID NOT WARRANT PASSING OF AN

EX PARTE AD INTERIM PRDER AND SBP HAS NOT EXERCISED ITS POWERS
WITHIN THE CONFINES OF LAW OF LAND.................................................................4

[B.1] THAT THE EX PARTE AD INTERIM ORDER IS VIOLATIVE OF THE PRINCIPLE OF AUDI
ALTERUM PARTEM.................................................................................................................4

[B.2] THAT THE DISGORGEMENT ORDER IS ILLEGAL AND PASSED IN AN INAPPROPRIATE

EXERCISE OF POWER...............................................................................................................6

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

AS SOUGHT BY DARCY AND JANE, WAS NOT IN ACCORDANCE WITH THE
PRINCIPLES OF NATURAL JUSTICE..............................................................................7

[C.1] SBP FAILED TO PROVIDE ADEQUATE REASONS FOR OPAQUENESS................................7

[C.2] SBP’S REFUSAL IS BEREFT OF TRANSPARENCY AND IS IN TURN VIOLATIVE OF RIGHT

TO FAIR TRIAL.........................................................................................................................9

[C.2.1] TRANSPARENCY....................................................................................................10

[C.2.2] RIGHT TO FAIR TRIAL & THE ‘CHERRY-PICKING’ PRINCIPLE.............................11

[C.3] NO REASONABLE OPPORTUNITY TO THE APPELLANTS NOR ANY JUSTIFICATION BY

SBP PROVIDED.....................................................................................................................12

ISSUE IV: THE TRADES UNDERTAKEN BY DARCY ARE NOT IN VIOLATION

OF THE PIT REGULATIONS.............................................................................................13

[D.1] PURPORTED INFORMATION IS NOT UNPUBLISHED PRICE SENSITIVE INFORMATION..13

[D.2] DARCY IS NOT AN INSIDER..........................................................................................14

[D.3] DARCY’S TRADING PATTERN IS IN COMPLIANCE WITH SEBI(PIT) REGULATION, 2015

..................................................................................................................................................17

PRAYER…………..............................................................................................................XIV

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LIST OF ABBREVIATIONS
ABBREVIATIONS EXPANSION
¶ Paragraph
AIR All India Reporter
Anr Another
Art. Article
Bom Bombay
SAT Securities Appellate Tribunal
SEBI Securities & Exchange Board of India
WTM Whole Time Member
UPSI Unpublished Price Sensitive Information
FMCG Fast Moving Consumer Goods
IT Information Technology
HC High Court
Hon’ble Honourable
PIT Prohibition of Insider Trading
Ors. Others
Ltd. Limited
SC Supreme Court
SCC Supreme Court cases
SCR Supreme Court Reporter
Sec. Section
Ed. Edition
v Versus

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INDEX OF AUTHORITIES

CASES
 A. Ebrahim and Company v. State of Bombay, (1962) 13 STC 877.......................3, 15
 Adjudication order against Shri G. Jayaraman in the matter of Satyam Computer
Services Ltd, PG/AO/AB/45/2012. .............................................................................14
 Adjudication Order in In the matter of Indian Petrochemicals Corporation Ltd,
AO/SG-AS/EAD/15/2016............................................................................................16
 Adjudication Order in the Matter of Aurobindo Pharma Ltd., Order/MC/VS/2019-
20/4550-4556.................................................................................................................2
 Anand Rathi & Ors. v. SEBI, 2002 (2) BomCR 403.....................................................5
 AR Antulay v RS Nayak, (1988) 2 SCC 602...............................................................10
 Ashok Kumar Thakur v State of Bihar, (2008) 17 SCC 486.......................................13
 Automotive Tyre Manufacturers Association v Designated Authority, (2011) 2 SCC
258................................................................................................................................10
 Balram Garg v. SEBI, (2022) SCC OnLine SC 472..............................................16, 17
 Bater v. Bater, (1951) P 35.....................................................................................16, 17
 Bhagat Raja v Union of India, AIR 1967 SC 1606......................................................11
 Cameo Corporate Services v. SEBI, SAT Appeal No. 566 of 2019 (Nov. 26, 2019).. .6
 CCI v Steel Authority of India Ltd, (2010) 10 SCC 744, 777.......................................8
 Chandrakala v. SEBI, (2012) SCC OnLine SAT 21..............................................16, 18
 Chintalapati Srinivasa Raju v. Securities Exchange Board of India, (2018) 7 SCC 443
................................................................................................................................16, 17
 D.A. Gadgil v. SEBI, SAT Appeal No. 3 of 2000 (Aug. 11, 2000). .............................5
 Dilip S. Pendse v. SEBI, (2009) SCC OnLine SAT
177……………………………………....……………………………………….16, 17
 GL Sultania v SEBI, (2007) 5 SCC 133......................................................................13
 Gosri Dairy Vyttila v. State of Kerala, (1961) 12 STC 683...........................................3
 Hanumant v. State of Madhya Pradesh, AIR 1952 SC 343.........................................16
 Herbertsons Ltd. v. CIT, (2004) 87 TTJ (Mumbai).......................................................3
 HL Trehan v Union of India, (1989) 1 SCC 764, 770.................................................11
 Hornal v. Neuberger Products Ltd., (1957) 1 QB 247.................................................16
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 In re LUCENT TECHNOLOGIES, INC. SECURITIES LITIGATION, 217 F. Supp.

2d 529...........................................................................................................................15
 In the matter of investigation into initial Public Offerings against Pratik Stock Vision
Private Limited,
WTM/GA/101/ISD/11/06.........................................................................7
 J.C. Mansukahni v. SEBI, SAT Appeal No.192 of 2014 (26th July, 2016)....................2
 Karvy Stock Broking Ltd. v. SEBI, (2008) SCC Online SAT 38..................................7
 Karvy Stock Broking Ltd. v. SEBI, 2007 SCC OnLine SAT 2.....................................6
 Kranti Associates (p) Ltd v Masood Ahmed Khan, (2010) 9 SCC 496....................9,13
 Libord Finance Ltd. v. SEBI, SAT Appeal No. 37 of 2008 (Mar. 31, 2008)................6
 Maneka Gandhi vs Union of India, 1978 AIR SC 597..................................................5
 Manoj Gaur v. SEBI, (2012) SCC OnLine SAT 176...................................................16
 Mineral Development v State of Bihar, AIR 1960 SC 468..........................................13
 Mousam Singha Roy v. State of West Bengal, (2003) 12 SCC 377............................16
 Ms Smitaben N Shah v SEBI, SAT Appeal No. 37 of 2010 (July 20, 2010)..............12
 National Insurance Co v Bharat Bhushan, (2008) 11 SCC 112...................................13
 Nea Karteria Maritime Co Ltd v Atlantic and Great Lakes Steamship Corporation,
(1981) Com LR 138.....................................................................................................12
 NSDL v. SEBI, (2007) SCC OnLine SAT 106..............................................................7
 OP Gupta v UOI, AIR 1987 SC 2257..........................................................................11
 Padola Veera Reddy v. State of Andhra Pradesh, AIR 1990 SC 79............................17
 PL Lakhanpal v Union of India, AIR 1967 SC 1507.....................................................8
 Price Waterhouse v SEBI, SAT Appeal No. 8 of 2011 (June 1, 2011).......................12
 Reliance Industries Ltd v SEBI, CRIMINAL APPEAL No. 1167 of 2022...................9
 Rohit Premkumar Gupta and Ors v. SEBI, SAT Appeal No. 11 of 2018 (Aug. 2,
2021)............................................................................................................................17
 Sahara India (Firm), Lucknow v Commissioner of Income Tax, Central-I, (2008) 14
SCC SC 151.................................................................................................................12
 Sahara India v Commissioner of Income Tax, (2008) 14 SCC 151...............................8
 Sanjay Gala, Adjudication Order in Matter of Navneet Publication India Ltd.,
NP/SJ/AO/10/2016.......................................................................................................16
 Seema Silk & Sarees v. Directorate of Enforcement (2008) 5 SCC 580.....................16
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 Seksaria Biswan Sugar Factory Ltd. v. CIT, AIR 1950 Bom 200...........................3, 15
 Shailesh S. Jhaveri v. SEBI, SAT Appeal No. 79 of 2012 (Oct. 4, 2012).....................7
 Shri Bhagwan v Ram Chand, AIR 1965 SC 1767.........................................................8
 Sontanath Barman v. S.V. Jagannatha, AIR 1973 AP 144............................................3
 SP Velumani v Arappoor Iyakam 2022 LiveLaw (SC) 507..................................10, 12
 State Bank of Patiala v. SK Sharma, (1996) 3 SCC 364..........................................9, 10
 Sterilite Industries (India) Limited v. SEBI, (2001) 34 SCL 485 (SAT).....................16
 Sunil Kumar v State of West Bengal, AIR 1980 SC 1170...........................................13
 Swadeshi Cotton Mills vs Union of India, 1981 AIR SC 818.......................................5
 T. Takano v. SEBI, (2022) SCC OnLine SC 210........................................................11
 TSC Industries Inc. v. Northway Inc., 426 U.S. 438, 449 (1976)..................................1
 Udayant Malhoutra v. SEBI, SAT Appeal No. 145 of 2020 (June 27, 2020) ...............5
 Vijay Mallya v Chairman, SEBI, (2003) SCC OnLine SAT 22..................................11

REGULATIONS
 SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015..........2, 3
 Security and Exchange Board of India (Prohibition of Insider Trading Regulations),
2015....................................................................................................................1, 14, 15

BOOKS
 ARMAAN PATKAR, INSIDER TRADING LAW AND PRACTICE (Eastern Book
Company 2019)..............................................................................................................6
 MP JAIN, PRINCIPLES OF ADMINISTRATIVE LAW (Lexis Nexis 2020).............8

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STATEMENT OF JURISDICTION

The Appellants have the honor to submit before the Hon’ble Securities Appellate Tribunal
the memorandum, pursuant to §15T of the Securities and Exchange Board of India Act,
1992, the present appeal has been preferred and presented in the matter of Moon Pharma &
Mr. Bennett v SBP clubbed with Jane & Darcy v SBP.

The present memorandum sets forth the facts, contentions, and arguments in the
present case.

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STATEMENT OF FACTS

BACKGROUND & RELEVANT EVENTS

1. Moon Pharma is Pindia’s second largest pharmaceutical company after Tibbott and is
rapidly expanding. In 2020, owing to a viral contagious disease caused by Alpha virus,
Pindia declared a nationwide lockdown. While all other industries were not performing
well, sectors like IT, FMCG and healthcare were at peak. Bockhardt, based out of the US,
is the biggest pharmaceutical company in the world and was looking to import a newly
patented medicine from Pindia. Mid-November speculations were that Bockhardt rejected
Tibbott’s bid and was going ahead with Moon Pharma which were then substantiated by a
definitive Licensing and Supply Agreement and a subsequent public announcement of the
said agreement.
2. Mr. Darcy, a finance person, worked with Moon Pharma from 2015-2020 and has now
joined Tibbott. His immediate junior, Jane, also specialized in finance, has been working
in Moon Pharma since 2017. Darcy and Jane have kept in touch and talk/meet
occasionally. The two are senior employees in their respective companies and were
incidentally involved in financial discussions with Bockhardt. Darcy is an active trader;
however, he has never traded in the stock of Moon Pharma previously, yet, some high
value trades have been performed by him in the month of October to December, 2021.
Additionally, he sold mutual funds, 50% of which were securities of Moon Pharma,
accumulating profits.

INVESTIGATION BY SBP
3. SBP, the regulator of securities market in Pindia, upon getting an alert in its internal
surveillance system, carried out a detailed investigation, thereby summoning the
compliance officer of Moon Pharma and directed it to provide certain information
including, but not limited to a detailed list of events starting from initial conversations
with Bockhardt till the execution of the deal, minutes of the internal meetings of its Board
of Directors with respect to the agreement and full list of designated persons of the
company involved in discussion.
4. Subsequently, Darcy and Jane were summoned on multiple occasions and Bockhardt was
directed by SBP to submit copies of deal documents and provide answers to queries of
SBP. Moon Pharma responded, stating that the deal was undertaken in ordinary course of
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company’s business and accordingly did not consider it as UPSI. Consequently, Mr.
Bennett, the designated compliance officer did not comply with PIT regulations. SBP was
also informed by Moon Pharma that Jane was involved in the discussions of the deal and
was aware of the nitty-gritties of the same.

EX-PARTE AD INTERIM ORDERS BY SBP

5. Two ex-parte ad interim orders were passed by SBP dictating the need for immediate
action owing to prima facie violation of securities laws.
Order 1 stated that the deal between Moon Pharma and Bockhardt be considered UPSI
and Mr. Bennett acted in violation of the regulations. Further, Mr. Bennett was prohibited
from taking up a dictatorship in any other listed entity till further orders by SBP.
Order 2 stated that several calls between Jane and Darcy prima facie inferred a
probability of Jane communicating the details of the Agreement to Darcy and the date of
its execution. Based on this inference, the two were prohibited from accessing the
securities market and dealing in securities of any listed companies till further orders.
Parties hence directed to reply within 21 days. Upon the receipt, Darcy and Jane
requested for inspection of all documents referred to and relied upon by SBP.

APPEALS BEFORE SAT

6. Pursuant to the orders, two appeals were filed before the Securities Appellate Tribunal.
Appeal 1: Filed jointly by Moon Pharma and Mr. Bennett, wherein Mr. Bennett
contended that the information with respect to the Agreement will not be considered
UPSI and it is company’s prerogative to decide the same and SBP cannot hold them
liable, further, the facts and circumstances do not warrant an ex-parte ad interim order for
the same.
Appeal 2: Filed jointly by Jane and Darcy, stating that they were friends and occasionally
talk over phone and one such call was made on 28-10-2021 and no UPSI was
communicated. Darcy also highlighted that the decision to trade in securities was taken
independently by him and was based on the developments in healthcare sector owing to
government announcements, further, the direction for disgorgement was illegal. The two
requested that the proceedings shall not further till all documents requested by them are
provided.

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7. SAT has admitted both the appeals and the matters are now at disposal stage. Owing to
the same cause of action, SAT has decided to hear both the appeals together.

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IDENTIFICATION OF ISSUES

The following issues are most humbly and respectfully submitted before the Tribunal in the
appeals:

[ISSUE A]
 WHETHER THE INFORMATION AND AGREEMENTS PERTAINING TO THE
DEAL BETWEEN MOON PHARMA & BOCKHARDT WAS UPSI IN TERMS OF
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
POWERS 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?

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SUMMARY OF ARGUMENTS

ISSUE A: THE INFORMATION AND AGREEMENT PERTAINING TO THE DEAL

BETWEEN MOON PHARMA & BOCKHARDT WAS NOT UPSI IN TERMS OF PIT
REGULATIONS.

¶ It is most humbly submitted before this Hon’ble tribunal that the information and
agreement pertaining to the deal between Moon Pharma and Bockhardt was not UPSI in
terms of the PIT Regulations. The potential effect on the income of Moon Pharma as a result
of the deal is a miniscule 1.3% of the annual turnover of FY’21 for the company. Any
information that could be treated as likely to materially affect the price of securities of the
company should have substantial financial implications whereas in the present case such a
meagre change in the annual turnover can be observed. Further, the definition accorded to
material under the LODR Regulations also does not cover the agreement between the
companies. Hence, the information and agreement pertaining to the agreement between the
two companies should not be considered UPSI.

ISSUE B: THE FACTS OF THE MATTER DID NOT WARRANT PASSING OF AN

EX PARTE AD INTERIM ORDER AND SBP HAS NOT EXERCISED ITS POWERS
WITHIN THE CONFINES OF LAW OF LAND.

¶ It is most humbly submitted before this Hon’ble tribunal that the facts of the matter did not
warrant passing an ex parte ad interim order and the SBP has not exercised its powers within
the confines of the law of land. The ex parte ad interim order is passed in clear violation of
the principle of Audi Alterum Partem, the law allows exclusion of the rules of natural justice
only in the presence of mitigating circumstances such as urgency or public interest and in the
present case no such mitigating circumstances can be made out. Further, the disgorgement
passed against Darcy is clearly exorbitant and punitive in nature which is illegal as
disgorgement orders are to be only remedial in nature.
Hence, the orders are passed in violation of the SBP’s powers and no such order was needed
in the present case.

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

AS SOUGHT BY DARCY AND JANE, IS NOT IN ACCORDANCE WITH THE
PRINCIPLES OF NATURAL JUSTICE.

¶ It is humbly submitted before this Hon’ble Tribunal that SBP’s refusal to provide the
information and documents as sought by Darcy and Jane is not in accordance with the
principles of natural justice, considering SBP failing to provide adequate reasons for
opaqueness, being antithetical to transparency, their action being bereft of transparency and
in turn violative of right to fair trial. Further, no reasonable opportunity to the appellants nor
any proper justification by SBP provided. Hence, SBP’s refusal to provide information and
documents as sought by Darcy and Jane was not in accordance with the principles of natural
justice.

ISSUE D: THE TRADES UNDERTAKEN BY DARCY WERE NOT IN VIOLATION

OF THE PIT REGULATIONS.

¶ It is humbly submitted before this Hon’ble tribunal that the trades undertaken by Darcy
were not in violation of the PIT Regulations. The information regarding the agreement
between the two companies is not an UPSI as it is not likely to materially affect the price of
securities of the company due to is insubstantial influence on the annual turnover of Moon
Pharma and nor it would be considered material under the LODR Regulations. Further, there
needs to be proved by a higher degree of preponderance of probability that communication of
UPSI was there between Jane and Darcy and since no such proof exists, Darcy cannot be held
to be an insider. Lastly, the trading pattern of Darcy shows no sudden changes that would
lead to the conclusion that he was trading in motivation of the UPSI, he was an active
investor and his actions were according to his discretion and motivated by the general uptrend
in the Pharma sector.

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ARGUMENTS ADVANCED

ISSUE A: THE INFORMATION AND AGREEMENTS PERTAINING TO THE

DEAL BETWEEN MOON PHARMA & BOCKHARDT WAS NOT UPSI IN TERMS
OF PIT REGULATIONS.

1. It is most humbly submitted before this Hon’ble court that the information and
agreements pertaining to the deal between Moon Pharma and Bockhardt was not UPSI in
terms of the PIT Regulations in light of the following [A.1] That the deal between Moon
Pharma and Bockhardt is not likely to materially affect the price of the securities; and
[A.2] That the deal between Bockhardt and Moon Pharma isn’t material as per the SEBI
(Listing Obligations and Disclosure Requirements) Regulations, 2015.

[A.1] THAT THE DEAL BETWEEN MOON PHARMA AND BOCKHARDT IS HIGHLY UNLIKELY
TO MATERIALLY AFFECT THE PRICE OF THE SECURITIES.

2. The term Unpublished Price Sensitive Information (hereinafter UPSI) has been defined in
Regulation 2(n) of the SEBI (Prohibition of Insider Trading) Regulations, 2015
(hereinafter “PIT Regulations”). The section reads as:1
(n) "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:
…
3. The phrase of utmost importance in the above stated definition is ‘likely to materially
affect the price of the securities of the company’, the regulations in no way clarify a
definition or degree for this likelihood. A degree of ‘substantial likelihood’ as
propounded in TSC Industries Ltd. v. Northway Inc., 2 could be used as a measure to
gauge the likelihood of material effect of a piece of information on the price of the

1
Security and Exchange Board of India (Prohibition of Insider Trading Regulations), 2015, § 2 (n), Gazette of
India, pt. III sec. 4 (Jan. 15, 2015).
2
TSC Industries Inc. v. Northway Inc., 426 U.S. 438, 449 (1976).
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securities of a company, this standard of likelihood has been imbibed into Indian
Jurisprudence in Aurobindo Pharma Ltd. v. SEBI.3
4. This standard of ‘substantial likelihood’ states that there must be a “substantial likelihood
that a reasonable shareholder would consider the information important in deciding how
to vote for it to be material information.” Therefore, only substantial likelihood of a piece
of information related to a company having a material effect on the prices of the securities
of a company would be deemed enough evidence to prove that information as UPSI.
5. In the present case, the response of Moon Pharma to SBP regarding its investigation
clearly stated that the “expected revenue pursuant to the deal was only 1.3% of the total
annual revenue of the company during FY’21” and was undertaken in the normal course
of business.4 Keeping in mind that Bockhardt is the largest pharmaceutical company in
the world and Moon Pharma is the second biggest pharmaceutical company in Pindia, the
deal between the two entities that are world leaders in their sector, a deal that is expected
to bring about revenue which is just equivalent to a meagre 1.3% of revenue for the FY
‘21 is not at all material enough to be considered a UPSI.
6. Information related to a proposal or a deal should have vast financial or other similar
implication to be considered material,5 further, the SAT found that the execution of
certain contracts was price sensitive, as these contracts constituted nearly 65 per cent of
the total order book of the company for that year.6
7. Therefore, it is humbly submitted that the piece of information pertaining to a deal of a
value equivalent to a 1.3% growth in revenue isn’t substantial or material enough to
consider the information as UPSI.

[A.2] THAT THE DEAL BETWEEN BOCKHARDT AND MOON PHARMA ISN’T MATERIAL AS
PER THE SEBI (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS)
REGULATIONS, 2015.

8. Clause 1 of Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements)

Regulations, 2015 reads as:7

3
Adjudication Order in the Matter of Aurobindo Pharma Ltd., Order/MC/VS/2019-20/4550-4556.
4
Moot Proposition, ¶ 12.
5
Adjudication order against Shri G. Jayaraman in the matter of Satyam Computer Services Ltd,
PG/AO/AB/45/2012, ¶ 17.
6
J.C. Mansukahni v. SEBI, SAT Appeal No.192 of 2014 (26th July, 2016), ¶ 6.
7
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, § 30, Gazette of India, pt. III sec.
4 (Sep. 2, 2015).
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(1.)Every listed entity shall make disclosures of any events or information which, in the
opinion of the board of directors of the listed company, is material.
9. Thus, from a bare reading of this regulation it can be inferred that SEBI places the onus
upon the board of directors of the listed company to decide whether an information is
material to satisfy the essentials for establishing an information as unpublished price
sensitive information, therefore the contention of Mr. Benett and the board of directors of
Moon pharma are completely justified in not recognising the information about the deal
between Moon pharma and Bockhardt as UPSI.
10. Furthermore, Regulation 30 refers to Para A of Part A of Schedule III to decide which all
events may be considered material. Clause 5 of Para A is significant in this matter as it
talks about agreements that are binding and not in normal course of business, the clause
reads:8
5. Agreements (viz. shareholder agreement(s), joint venture agreement(s), family
settlement agreement(s) (to the extent that it impacts management and control of the
listed entity), agreement(s)/treaty(ies)/contract(s) with media companies) which are
binding and not in normal course of business, revision(s) or amendment(s) and
termination(s) thereof.
11. In this clause, the phrase of importance is ‘not in normal course of business’, the
regulations nowhere define what would be covered under normal course of business. The
understanding of the courts in can be used as a guide to understand this, it was held that
the nature of the company’s business, its past practices and the frequency of past
transactions are relevant factors to consider while formulating the normal course of
business.9
12. Furthermore, it has been held that the term “ordinary course of business” has not been
defined in the Companies Act, 2013, but has been held to include matters having a
reasonable connection with the normal business of the company.10
13. In the present case, both Moon pharma and Bockhardt are established pharmaceutical
companies based out of Pindia and United States respectively, and the Licensing and
Supply Agreement signed between these two entities is regarding import of a newly
patented cough and cold medicine from Pindia.
8
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Sched. III, Gazette of India, pt. III
sec. 4 (Sep. 2, 2015).
9
Sontanath Barman v. S.V. Jagannatha, AIR 1973 AP 144; Herbertsons Ltd. v. CIT, (2004) 87 TTJ (Mumbai);
Gosri Dairy Vyttila v. State of Kerala, (1961) 12 STC 683.
10
Seksaria Biswan Sugar Factory Ltd. v. CIT, AIR 1950 Bom 200; A. Ebrahim and Company v. State of
Bombay, (1962) 13 STC 877.
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14. Applying the test laid down in the legal dictums we can state that the agreement for
import of a drug does have a reasonable connection with the business of Moon pharma as
also can be seen in Moon Pharma’s reply to SBP that “inter alia stated that the deal with
Bockhardt was undertaken in the ordinary course of the company’s business”11
15. Thus, it is humbly submitted that, Clause 5 of Para A of Part A of Schedule III wouldn’t
apply on Moon pharma and Mr. Benett and the board of directors of Moon pharma had no
obligation to consider it as UPSI.

ISSUE B: THE FACTS OF THE MATTER DID NOT WARRANT PASSING OF AN

EX PARTE AD INTERIM PRDER AND SBP HAS NOT EXERCISED ITS POWERS
WITHIN THE CONFINES OF LAW OF LAND.

1. It is most humbly submitted that the facts of the matter did not warrant passing of an ex
parte ad interim order and that the SPB has not exercised its powers within the confines of
the law of land in light of the following [B.1] The ex parte ad interim order is violative of
the principle of Audi Alterum Partem and [B.2] The disgorgement order is unlawful.

[B.1] THAT THE EX PARTE AD INTERIM ORDER IS VIOLATIVE OF THE PRINCIPLE OF AUDI
ALTERUM PARTEM.

2. The principle of Audi Alterum Partem is one of the two basic principles of natural justice,
and means hear both sides or no man shall be condemned unheard. The rule of Audi
Alterum Partem is one of the basic rules for a fair trial, Bhagwati J. in Maneka Gandhi
v. Union of India recognized the importance of this principle by emphasising on its
role as a check against abuse or misuse of power and ensuring that a just decision is
reached, hence, he stated that the reach and applicability of Audi Alterum Partem
should not be circumcised.12
3. The SAT in DA Gadgil v. SEBI, laid that the principles of natural justice demands
that a person who is to be directly affected by an administrative action be given prior
notice of what is proposed so as to enable him to make proper representation to

11
Moot Proposition, ¶ 12.
12
Maneka Gandhi vs Union of India, 1978 AIR SC 597.
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defend his cause, exclusion of this principle thus, would necessarily mean that the
order passed in contravention is null and void.13
4. However, the Apex Court has recognised circumstances where the courts have found
that statutes by implication have sought to ignore the principle of Audi Alterum
Partem due to the presence of certain mitigating factors such as urgency, taking a
prompt action of a preventive or a remedial nature etc., and has recognised this
exception.14Therefore, in order to exclude the application of the principle of Audi
Alterum Partem, urgency or supervening public interest can be taken as possible
grounds for exception to the general rule.15
5. The onus of pointing that a specific urgency was present in the matter that
necessitated the passing of an ex parte ad interim order in violation of the principle of
Audi Alterum Partem rests on SEBI, if the SEBI fails to show that there was an
inherent urgency in the matter as can be inferred from the facts and circumstances of a
particular case then any such order can be declared as null and void.
6. The SAT in the case of SEBI v. Udayant Malhoutra, there is no real urgency to pass
an ex parte ad interim order especially during the pandemic period, the court further
laid that the facts should point out a case of extreme urgency to pass such order just
on the prima facie finding that a person is alleged to be an insider, without
considering the balance of convenience and irreparable injury that would be caused. 16
7. In the present case, there was no specific urgency as to passing absolute restraint
orders17 in respect of Moon Pharma which can also be considered as final orders 18 as
the operation of these orders was said to be in force until further orders. Furthermore,
it can also be observed that the order by the SBP was given on June 23, 2022 19 with
respect to trades that were carried out October, 2021 20, thus, no case of an urgency can
be made out from the appending facts and circumstances.

13
D.A. Gadgil v. SEBI, SAT Appeal No. 3 of 2000 (Aug. 11, 2000).
14
Swadeshi Cotton Mills vs Union of India, 1981 AIR SC 818.
15
Anand Rathi & Ors. v. SEBI, 2002 (2) BomCR 403.
16
Udayant Malhoutra v. SEBI, SAT Appeal No. 145 of 2020 (June 27, 2020), ¶ 13.
17
Moot Proposition, ¶ 13(i).
18
Cameo Corporate Services v. SEBI, SAT Appeal No. 566 of 2019 (Nov. 26, 2019), ¶ 16.
19
Moot Proposition, ¶ 13.
20
Moot Proposition, ¶ Table 3.
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8. Thus, it is humbly submitted that the ex parte order passed by SBP is in violation of
the principle of Audi Alterum Partem as no case of urgency can be made out which
can be used to avail the exception of not following the rules of natural justice.

[B.2] THAT THE DISGORGEMENT ORDER IS ILLEGAL AND PASSED IN AN INAPPROPRIATE

EXERCISE OF POWER.

9. The general object behind passing a disgorgement order is to ensure that the offender is
made to repay their illegal gains and serves the purpose of an equitable monetary remedy.
SEBI possesses the power to order disgorgements in an ex parte ad interim order as
derived from Section 11B of the SEBI Act, 1992.21
10. The object of passing orders under Section 11 and 11B of the SEBI Act, 1992 is to
provide a preventive as well as equitable remedy, the SAT in Libord Finance Ltd. v. SEBI
held that the object of Section 11B is primarily protection of interest of the investors and
the markets and not to punish the delinquent. 22 Therefore, a disgorgement should not be
punitive in nature.
11. SAT in Karvy Stock Broking Ltd. v. SEBI, laid that disgorgement is neither a punitive
action nor a retributive action to repay damages sustained by wronged investors. The
amount disgorged can also not exceed the quantum of illegal profits made by the
accused.23
12. In the present case, the disgorgement order passed by SEBI against Darcy ordered him to
pay a sum of 1.57 Crore24, this has been divided into two sections whereas 1 Crore is to
be paid for sale of mutual funds while 57 lakhs is to be paid for wrongful losses
accumulated in insider trading.25
13. Not only, this sum is exorbitant, it is completely unjustified as the amount of 1 Crore that
is directed to be paid by Darcy is for sale of mutual funds in which he has been investing
for the past 5 years, i.e., from a period where no UPSI regarding Moon Pharma ever
existed while the residue amount of 57 lakhs is also without any foundation as there has
been no determination of guilt. This is again completely unjustified as SEBI cannot issue

21
ARMAAN PATKAR, INSIDER TRADING LAW AND PRACTICE (Eastern Book Company 2019).
22
Libord Finance Ltd. v. SEBI, SAT Appeal No. 37 of 2008 (Mar. 31, 2008), , ¶ 3.
23
Karvy Stock Broking Ltd. v. SEBI, 2007 SCC OnLine SAT 2.
24
Moot Proposition, ¶ 13.
25
Moot Proposition, ¶ 9.
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a disgorgement order without determination of guilt 26 and conclusive proof that the
accused has violated the relevant regulations and earned illegal profits as a result.27
14. Further, in Karvy Stock Broking v. SEBI, SAT held that disgorgement orders cannot be
passed ex parte as they are violative of natural law as the accused has no opportunity to
defend themselves in this respect.
15. For passing any interlocutory order, the court must be satisfied that while passing any
such order, the balance of convenience completely lies on the side requesting such
injunction. If while granting an interim order, the opposition is more inconvenienced by
the order then the onus rests on the court to not pass any such order. SEBI cannot pass
such a drastic order debarring a person from carrying on the business or stigmatize such
person as not fit to deal in securities market without holding a proper enquiry. 28 In the
present case, it can be clearly observed that the interim disgorgement order passed against
Darcy would cause irreparable injury to the appellant as he would deemed not fit enough
to trade and moreover, the Rs. 1.57 Crore damages would be levied against him.
16. Thus, it is humbly submitted that the said disgorgement order passed by SBP against
Darcy is illegal as, firstly, it is punitive in nature and not remedial in nature and
moreover, the balance of convenience lies on the side of the appellants, and secondly,
because it has been passed ex parte and in violation of the principles of natural justice.

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

AS SOUGHT BY DARCY AND JANE, WAS NOT IN ACCORDANCE WITH THE
PRINCIPLES OF NATURAL JUSTICE.

1. It is humbly submitted before this Hon’ble Tribunal that SBP’s refusal to provide the
information and documents as sought by Darcy and Jane was not in accordance with the
principles of natural justice, in light of the following, [C.1] SBP failed to provide
adequate reasons for opaqueness, [C.2] Is bereft of transparency and is in turn violative of
right to fair trial, and [C.3] No reasonable opportunity to the appellants nor any proper
justification by SBP provided.

26
NSDL v. SEBI, (2007) SCC OnLine SAT 106.
27
Shailesh S. Jhaveri v. SEBI, SAT Appeal No. 79 of 2012 (Oct. 4, 2012), ¶ 9.
28
In the matter of investigation into initial Public Offerings against Pratik Stock Vision Private Limited,
WTM/GA/101/ISD/11/06.
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[C.1] SBP FAILED TO PROVIDE ADEQUATE REASONS FOR OPAQUENESS.

2. The issue at hand deals with SBP’s refusal to provide information and documents, as
sought by Jane and Darcy, which is clearly violative of the principles of natural justice. 29
In light of the facts of the case, SBP prima facie inferred that Jane had communicated the
details of the Agreement to Darcy and the date on which the agreement will be finally
executed. Based on the said inference, SBP prohibited Jane and Darcy from accessing
securities market and dealing in securities of any listed companies till further orders.30
3. Further, a show-cause notice was issued to the two of them 31. Upon receipt of the order,
Darcy and Jane requested for the inspection of all documents that were referred to and
relied upon by SBP, while issuing the order.32 However, the same was rejected.
4. The basic principle is that natural justice is implied by the court and therefore the
omission being taken, does not ipso facto exclude hearing. 33 SBP, as a regulator and a
quasi-judicial body is of such a nature that it requires a mandated personal hearing,
moreover, every quasi- judicial order would require the authority to act in conformity
with the principles of natural justice34. It is the general rule that any quasi-judicial body
that has been given the power to adjudge the rights of citizens would act in a manner in
accordance with the principles of natural justice.35 Unless a statutory provision excludes
the application of the principles of natural justice, the requirement of giving reasonable
opportunity of being heard is to be read into the provisions of the statute.36
5. Its principles not only applied to courts of law only but to each and every quasi-judicial or
statutory authority who have upon them, the responsibility of determining the obligation
and rights, of the people. The principle of natural justice has twin ingredients;
firstly, the person who is likely to be adversely affected by the action of the authorities
should be given notice to show cause thereof and granted an opportunity of hearing,
which was given in this case, however, with regards to the second ingredient, it requires
that the orders so passed by the authorities should give reason for arriving at any
conclusion showing proper application of mind. Violation of either of them could in the
given facts and circumstances of the case, vitiate the order itself. The order of an
29
MP JAIN, PRINCIPLES OF ADMINISTRATIVE LAW (Lexis Nexis 2020).
30
Moot Proposition, ¶13.
31
Moot Proposition, ¶15.
32
Moot Proposition, ¶16.
33
PL Lakhanpal v Union of India, AIR 1967 SC 1507.
34
CCI v Steel Authority of India Ltd, (2010) 10 SCC 744, 777.
35
Shri Bhagwan v Ram Chand, AIR 1965 SC 1767.
36
Sahara India v Commissioner of Income Tax, (2008) 14 SCC 151.
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administrative authority may not provide reasons like a judgement but the order must be
supported by the reasons of rationality. In light of the facts of the case, the second
ingredient still lacks.
6. In Kranti Associates (P) Ltd. v. Masood Ahmed Khan, 37 the Hon’ble Supreme Court held
the necessity to give proper reasons to be an essential under the natural justice doctrine.
The reason for opaqueness must have an overriding effect over the duty to act fairly,
which in this case could not be established. Similarly, in State Bank of Patiala v. SK
Sharma,38 this Court while dealing with document disclosure and natural justice held that
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. 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
and deference.
7. "Opaqueness only propagates prejudice and partiality. Opaqueness is antithetical to
transparency. It is of the 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. 39 Moreover, Regulation
5 of the 1997 Regulations requires SEBI to provide a reasonable opportunity to the
concerned parties and to record reasons where any direction is issued by the Board in a
specific case relating to interpretation or application of those regulations. Regulation 4(6)
requires the board to pass a reasoned order on the application for exemption from the
application of Regulation 10, 11 and 12 only after affording reasonable opportunity to the
concerned parties and after considering all the relevant facts, which cannot be established
from the facts in question.

[C.2] SBP’S REFUSAL IS BEREFT OF TRANSPARENCY AND IS IN TURN VIOLATIVE OF RIGHT

TO FAIR TRIAL.

8. SBP prima facie inferred that Jane had communicated the details of the Agreement to
Darcy and the date on which the agreement will be finally executed. Based on the said
37
Kranti Associates Private Limited v. Masood Ahmed Khan, (2010) 9 SCC 496.
38
State Bank of Patiala v. SK Sharma, (1996) 3 SCC 364.
39
Reliance Industries Ltd v SEBI, CRIMINAL APPEAL No. 1167 of 2022, ¶ 45.
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UNIVERSITY MOOT COURT SELECTIONS, GRAND INTRA, 2022

inference, SBP prohibited Jane and Darcy from accessing securities market and dealing in
securities of any listed companies till further orders 40, in turn any and every document
asked by Jane and Darcy post attainment of the show-cause notices have been denied, is
in itself prima facie bereft of transparency.
9. SEBI has a duty to act in a fair manner rather than circumvent the rule of law thereby
ensuring, ‘Justice must not only be done, but also seen to be done’. 41 Additionally, any
and every order made by a quasi-judicial body, without following the principles of natural
justice is null and void42. The said order triggers the following 2 aspects: Transparency
and Right to fair trial.

[C.2.1] Transparency
10. In the present case, Darcy was asked to disgorge a sum of 1.57 crores, which in itself is a
miscalculation, as in line with the facts of the case, Darcy sold his mutual funds held by
him in the FBI Pharma Scheme of the FBI Pharma Focus Mutual Funds, which were
bought by him through a systematic investment plan over a period of five years 43 and is
not solely pertaining to Moon Pharma. In addition to these, the order 2 also stated that
Jane and Darcy were directed not to associate themselves with any listed company till
further orders44. Upon receipt of the order, Darcy and Jane requested for inspection of all
documents referred to and relied on by SBP to ensure transparency and for an equal
footing.
11. However, SBP’s refusal cannot be appreciated and is in gross violation of the appellant’s
right to natural justice45. Further, in light of this case, it can be implemented that 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
itself46. It is a fundamental rule of law that no decision must be taken to which will affect
the rights of any person without first giving him an opportunity of putting forward his
case47. Further, there is no implied or express bar on the application of natural justice
either in the SEBI Act or in the 1997 Regulations and rather the aforementioned

40
Moot Proposition, ¶ 13.
41
Supra note 40 at 9.
42
AR Antulay v RS Nayak, (1988) 2 SCC 602.
43
Moot Proposition, ¶9.
44
Moot Proposition, ¶13.
45
Automotive Tyre Manufacturers Association v Designated Authority, (2011) 2 SCC 258.
46
SP Velumani v Arappoor Iyakam 2022 LiveLaw (SC) 507.
47
OP Gupta v UOI, AIR 1987 SC 2257.
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UNIVERSITY MOOT COURT SELECTIONS, GRAND INTRA, 2022

provisions clearly show that the scheme of things in the SEBI Act and the Regulations
require the board to act in conformity with the principles of natural justice. Similarly, as
held in Vijay Mallya v Chairman, SEBI48, no strict procedure is prescribed for holding an
inquiry under the Act or regulations, the principles of natural justice are followed. In line
with the facts of the case and their application with the law, it can be established that
owing to the Order 2, Jane and Darcy were prohibited from accessing securities market
and dealing in the securities of any listed companies till further orders.
12. As held in T. Takano case49, 3 fundamental purposes of disclosure of information include:
reliability, fair trial, transparency, and accountability.
13. With regards to reliability, the role of the court is not restricted to interpreting the
provisions of law but also determining the veracity and truth of the allegations made
before it. The court would be able to perform this function accurately only if both parties
have access to information and possess the opportunity to address arguments and
counterarguments related to the information. Similarly, since a verdict of the Court has
far reaching repercussions on the life and liberty of an individual, it is only fair that there
is a legitimate expectation that the parties are provided all the aid in order for them to
effectively participate in the proceedings, this deals with the fair trial aspect and finally,
the investigative agencies and the judicial institution are held accountable through
transparency and not opaqueness of proceedings and when an order is quashed for the
breach of natural justice, the concerned party is relegated to its original position and the
authority ought to start the proceedings afresh50.

[C.2.2] Right to Fair Trial & the ‘Cherry-Picking’ Principle

14. The authority which embarks upon a post-decisional hearing will naturally proceed with a
closed mind and there is hardly any chance of getting a proper consideration of the
representation at such a post-decisional opportunity51. The right to fair trial aspect takes
into account that it is only fair that there is a legitimate expectation that the parties are
provided all the aid in order for them to effectively participate in the proceedings. The
purpose of disclosure of information is not merely individualistic, that is to prevent errors
in the verdict but is also towards fulfilling the larger institutional purpose of fair trial and

48
Vijay Mallya v Chairman, SEBI, (2003) SCC OnLine SAT 22.
49
T. Takano v. SEBI, (2022) SCC OnLine SC 210.
50
Bhagat Raja v Union of India, AIR 1967 SC 1606.
51
HL Trehan v Union of India, (1989) 1 SCC 764, 770.
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transparency. Since the purpose of disclosure of information targets both the outcome
(reliability) and the process (fair trial and transparency), it would be insufficient if only
the material relied on is disclosed. Such a rule of disclosure only holds nexus to the
outcome and not the process. Therefore, as a default rule, all relevant material must be
disclosed52.
15. Even the cherry-picking, if resorted to by SEBI, only derogates the commitment to a fair
trial53. The SC observed that the requirement of giving reasonable opportunity of being
heard is generally read into the provisions of a statute, particularly when the order has
adverse civil consequences and this principle will hold good irrespective of whether the
power conferred on the statutory body or the tribunal is administrative or quasi-judicial 54.
It was also stated that no general rule of universal application can be laid down to the
applicability of principle audi alteram partem in addition to the provision. In light of the
facts of this case too, SBP’s refusal is nothing but a blatant dismissal of the right to fair
trial of the appellants.
16. In a similar instance of appeal, the Tribunal observed that the documents asked for which
are relevant would help the delinquent to prepare his/her defense and thus such
documents are required to be furnished. Such observation was made in the context that
the details in the charts relied upon in the show cause notice was culled out in the trade
and order logs and therefore the Tribunal observed that it was necessary that the trade and
order logs should be provided to the appellant55. Similarly, fairness demands that the
entire material collected during the course of investigation should be made available for
inspection to the person whose conduct was in question and that said material should also
be supplied56.

[C.3] NO REASONABLE OPPORTUNITY TO THE APPELLANTS NOR ANY JUSTIFICATION BY

SBP PROVIDED.

17. In light of the facts of the case, no reasonable opportunity to be heard was provided and
this reasonable opportunity does not exist until and unless the requested documents
referred to and relied upon by SBP have been availed to the appellants. A person against

52
Supra note 46 at 10.
53
Nea Karteria Maritime Co Ltd v Atlantic and Great Lakes Steamship Corporation, (1981) Com LR 138.
54
Sahara India (Firm), Lucknow v Commissioner of Income Tax, Central-I, (2008) 14 SCC SC 151.
55
Ms Smitaben N Shah v SEBI, SAT Appeal No. 37 of 2010 (July 20, 2010), ¶ 7.
56
Price Waterhouse v SEBI, SAT Appeal No. 8 of 2011 (June 1, 2011), ¶ 20.
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whom any action is sought to be taken or who’s right or interest is being affected should
be given a reasonable opportunity to defend himself. The reasonable opportunity or the
concept of fair hearing depends on the facts and circumstances of the case. This is an
elastic concept and cannot be susceptible of easy and precise definition 57. However,
where complex and technical questions of facts are involved, it is pertinent that justice
must not only happen, but also seen to happen. In light of the facts of this case, Darcy and
Jane requested that the proceedings by SBP should not go ahead till all the documents
requested by them are provided to them58. Failing to provide the documents, SBP hence,
did not provide the appellants a reasonable opportunity to defend their case. In
furtherance, the counsel humbly submits that it is essential for an adjudicatory body to
provide for its decision59. SBP has to act prudently and within its jurisdiction, should
apply its reasoned mind while passing any order60. On this note, SBP certainly passed an
unjustified order wrt Order 2, without granting a reasonable opportunity for the appellants
to defend the case. SBP prima facie inferred that Jane had communicated the details of
the Agreement to Darcy and the date on which the agreement will be finally executed.
Based on the said inference, SBP prohibited Jane and Darcy from accessing securities
market and dealing in securities of any listed companies till further orders 61, in turn any
and every document asked by Jane and Darcy post attainment of the show-cause notices
have been denied. This arbitrary action of SBP has violated the principle of natural
justice.

ISSUE IV: THE TRADES UNDERTAKEN BY DARCY ARE NOT IN VIOLATION

OF THE PIT REGULATIONS.

It is humbly submitted that trades undertaken by Darcy are not in violation of PIT
Regulations 2015, in light of the following, [D.1] Information pertaining to Moon Pharma’s
contract with Bockhardt is not Unpublished Price Sensitive in nature; [D2] Darcy is not an

57
Mineral Development v State of Bihar, AIR 1960 SC 468; Sunil Kumar v State of West Bengal, AIR 1980 SC
1170.
58
Moot Proposition, ¶ 17.
59
Ashok Kumar Thakur v State of Bihar, (2008) 17 SCC 486; Supra note 38 at 9; National Insurance Co v
Bharat Bhushan, (2008) 11 SCC 112.
60
GL Sultania v SEBI, (2007) 5 SCC 133.
61
Moot Proposition, ¶ 13.
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insider, as no communication took place, [D3] Darcy’s trading pattern are in compliance with
SEBI PIT Regulations, 2015.

[D.1] PURPORTED INFORMATION IS NOT UNPUBLISHED PRICE SENSITIVE INFORMATION

1. According to SEBI (PIT) Regulations, 2015, price sensitive information is one which if
published is likely to materially affect the price of the securities of a company. 62 In the
present case, the purported information is not likely to materially affect the price of the
securities and is done in the normal course of business.
2. The deal between Moon Pharma and Bockhardt is not likely to materially affect the price
of the securities. As the expected revenue pursuant to the deal was only 1.3% of the total
annual revenue of the company during FY’21 and was undertaken in the normal course of
business63 and so was not material enough to be considered as UPSI. Information related
to a proposal or a deal should have vast financial or other similar implication to be
considered material.64
3. The deal between Bockhardt and Moon Pharma isn’t material as per the SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015. The contention of Mr.
Benett and the board of directors of Moon pharma is completely justified in not
recognising the information about the deal between Moon pharma and Bockhardt as
UPSI. Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015refers to Para A of Part A of Schedule III to decide which all events
may be considered material. Under it events which are ‘not in normal course of business’
are considered material.
4. The term “ordinary course of business” has been held to include matters which have a
reasonable connection with the normal business of the company in pursuance of the
objects enumerated in the memorandum or articles of association. 65 The deal was not
price sensitive in nature, because if any trade is done in the ordinary course of business
activities, it will not be considered as a price sensitive in nature. The agreement for
import of a drug does have a reasonable connection with the business of Moon pharma as
also can be seen in Moon Pharma’s reply to SBP that “inter alia stated that the deal with
62
Security and Exchange Board of India (Prohibition of Insider Trading Regulations), 2015, Gazette of India, pt.
III sec. 4 (Jan. 15, 2015), § 2(1)(n).
63
Moot Proposition, ¶ 12.
64
Adjudication order against Shri G. Jayaraman in the matter of Satyam Computer Services Ltd,
PG/AO/AB/45/2012, ¶ 17.
65
Supra note 10 at 3.
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Bockhardt was undertaken in the ordinary course of the company’s business”, therefore, it
is not to be considered material.
5. Therefore, due to the aforementioned submissions it is most humbly submitted that the
information relating to Moon Pharma’s contract with Bockhardt is not UPSI.

[D.2] DARCY IS NOT AN INSIDER

6. According to SEBI (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.66 Darcy was neither associated with Moon Pharma nor did he engage in any
frequent communication with Moon Pharma so as to have reasonable access to UPSI. No
material evidence has been put forth to show that Darcy is reasonably expected to have
UPSI. The expression “reasonably expected” cannot be a mere ipse dixit and there should
be sufficient material adduced to support the expression.67
7. For Darcy to be an insider there should be communication of information from Jane to
Darcy which cannot be proved in the present case. Mere informal telephonic
conversations on account that Darcy and Jane were friends as Ms. Jane was Darcy’s
immediate junior in the business school and that they have worked together in Moon
Pharma and have kept in touch and talk/meet occasionally68 by no stretch of the
imagination, signals to the existence of such a relationship which would allow Darcy
reasonable access to UPSI. Both are also enthusiast and share common WhatsApp groups
for discussions and leisure betting during live cricket matches and closely follow the
yearly Pindian Premier League (“PPL”).69 Close familial or friendly relationship between
the insider and the traders in the relevant securities and their trading patterns would not
constitute sufficient evidence to prove that the traders had received UPSI from the insider
and traded on the basis of such UPSI.70
8. With regard to several calls between Jane and Darcy during the months of October to
December were normal, as she is friends with Darcy and they occasionally talk over
phone. One such usual conversation happened on October 28, 2021 between them and
Jane did not communicate any UPSI to Darcy. The call might have been regarding PPL’s
66
Security and Exchange Board of India (Prohibition of Insider Trading Regulations), 2015, Gazette of India, pt.
III sec. 4 (Jan. 15, 2015), § 2(1) (g).
67
In re LUCENT TECHNOLOGIES, INC. SECURITIES LITIGATION, 217 F. Supp. 2d 529.
68
Moot Proposition, ¶ 7.
69
Id.
70
Manoj Gaur v. SEBI, (2012) SCC OnLine SAT 176; Chandrakala v. SEBI, (2012) SCC OnLine SAT 21.
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playoffs which were scheduled in the last week of October 2021. It must also be noted
that the order passed by the SBP is using call records as proof against Darcy to show that
there was communication regarding the UPSI, however, it is important to note that these
are not ‘call recordings’71 and thus, SBP has no knowledge as to the contents of these
calls between Jane and Darcy.
9. The SAT has noted that within the civil standard, there are degrees of probability. The
SAT has relied on Hornal v. Neuberger Products Ltd.72 and Bater v. Bater73 for principles
on degree of proof. It has categorically stated that if the evidence does not meet the
“required degree of probability necessary to establish such a serious charge of insider
trading no action can be taken”. 74 The charge of insider trading is one of the most serious
charges in relation to the securities market and having regard to the gravity of this
wrongdoing, higher must be the preponderance of probabilities in establishing the same.75
More serious an offence is, the higher is the degree of proof required to secure a
conviction.76 Evidence-based on probabilities and endeavors to prove the fact on the basis
of a preponderance of probabilities is not sufficient to establish insider trading.77
10. Although only circumstantial evidence suffices in cases of insider trading, the court has
stated that it can be considered only when certain foundational facts are established, and it
rejected that the trading pattern of the appellants can be the circumstantial evidence to
prove communication.78 It is only through producing cogent materials (letters, emails,
witnesses etc.) that the said communication of UPSI could be proved and not by deeming
the communication to have happened owing to the alleged proximity between the
parties.79 SEBI has failed to produce any email and/or any written or oral communication
which shows that the Jane has communicated the alleged UPSI to Darcy. Such an
approach of presuming communication of information would fall foul of the explicit
ruling80 of the Hon'ble Supreme Court of India. To sustain a conviction based on

71
Moot Proposition, ¶ 13(ii).
72
Hornal v. Neuberger Products Ltd., (1957) 1 QB 247.
73
Bater v. Bater, (1951) P 35.
74
Dilip S. Pendse v. SEBI, (2009) SCC OnLine SAT 177.
75
Id.; Sanjay Gala, Adjudication Order in Matter of Navneet Publication India Ltd., NP/SJ/AO/10/2016, , ¶ 15.
76
Mousam Singha Roy v. State of West Bengal, (2003) 12 SCC 377.
77
Sterilite Industries (India) Limited v. SEBI, (2001) 34 SCL 485 (SAT); Adjudication Order in the matter of
Indian Petrochemicals Corporation Ltd, AO/SG-AS/EAD/15/2016.
78
Hanumant v. State of Madhya Pradesh, AIR 1952 SC 343; Chintalapati Srinivasa Raju v. Securities Exchange
Board of India, (2018) 7 SCC 443; Seema Silk & Sarees v. Directorate of Enforcement (2008) 5 SCC 580.
79
Balram Garg v. SEBI, (2022) SCC OnLine SC 472.
80
Chintapalati, Supra note 78 at 16.
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circumstantial evidence, the evidence must be complete and incapable of leading to any
other explanation.81
11. In the absence of direct corroborated evidence, no action for insider trading can be taken
against any person and benefit of doubt will always be in his / her favour. 82 There is no
substantial evidence provided by SEBI to prove the communication of UPSI by Jane to
Darcy. Reliance on only call records and relationship between Jane and Darcy does not
does not establish the foundational facts necessary and does not meet the required degree
of probability necessary to establish Darcy as an insider. Therefore, it is most respectfully
submitted that Darcy is not an insider.

[D.3] DARCY’S TRADING PATTERN IS IN COMPLIANCE WITH SEBI(PIT) REGULATION,

2015

12. The Respondents humbly submits that Darcy’s trading pattern is in compliance with SEBI
PIT regulations 2015. Trading done by Darcy from 29th October 2021 to 31st October
2021 is an independent exercise of his application of mind as an active trader over the
market floundered information and speculations. Mere reliance on “pattern and timing of
trades” is not sufficient to discharge SEBI of its burden of proof.83
13. In a case where the noticee was not an active investor in the equity market, suddenly
during the nine days whilst in possession of UPSI, purchased shares more than Rs. 1 crore
in value was indicative that he used that UPSI to make profit. 84 Darcy is 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. 85 This
establishes that he was an active investor and has not suddenly become operative in the
market under the influence of UPSI.
14. On account of a pandemic caused by the Alpha virus, Pindia had declared a nationwide
lockdown and the movement of persons and goods was limited to only essential goods
and services. While all other industries were not performing well, sectors such as
information technology, FMCG and healthcare were at their peak and stock prices of the

81
Padola Veera Reddy v. State of Andhra Pradesh, AIR 1990 SC 79.
82
Supra note 75 at 16.
83
Supra note 80 at 16.
84
Rohit Premkumar Gupta and Ors v. SEBI, SAT Appeal No. 11 of 2018 (Aug. 2, 2021),
http://sat.gov.in/english/pdf/E2021_JO20189.PDF.
85
Moot Proposition, ¶ 8.
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listed companies in these sectors continued to move upwards in spite of general downturn
in the indices and considerable loss of value in other blue-chip stocks. 86
15. The trades executed by Darcy were based upon a fundamental analysis as well as from a
general information available in the public domain. He was a regular investor in the
securities market and his trading decisions were consistent with his trading pattern in the
past. Like for instance he has traded in the scrip of PIPLA Pharma as the healthcare sector
was doing good and regularly traded in the scrips of healthcare companies like Tibbott
and had also bought mutual fund units of the FBI Pharma Focus Mutual Fund in which he
has systematically invested over a period of 5 years.
16. The decision to trade in the securities of Moon Pharma was taken independently by him,
as the healthcare sector was generally performing well on account of the Alpha Pandemic
and concessions given by government to pharma companies. 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 this period and because he was in
the possession of any Price Sensitive Information.
17. Prohibition contained in regulation 3 of the Regulations apply only when an insider trades
or deals in securities on the basis of any unpublished price sensitive information and not
otherwise.87
18. It can be inferred from the appending facts and circumstances that Darcy did not trade on
the basis of any UPSI but upon a fundamental analysis as well as from a general
information available in the public domain, prohibition contained in Regulation 3 will not
apply to him. Hence, it is humbly submitted that Darcy’s trading pattern is in compliance
with SEBI PIT Regulations, 2015.

86
Moot Proposition, ¶ 3.
87
Chandrakala, Supra note 70 at 16.
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PRAYER

THEREFORE, in light of the facts of case, issues identified, arguments presented, and
authorities cited, the Appellants request this Hon’ble Tribunal to find, adjudge and declare
that:

In the present case

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 DID NOT WARRANT PASSING OF AN EX

PARTE AD INTERIM ORDER AND SBP DID NOT EXERCIS ITS POWERS
WITHIN THE CONFINES OF LAW OF LAND.

III. SBP’S REFUSAL TO PROVIDE INFORMATION & DOCUMENTS, AS

SOUGHT BY DARCY AND JANE, WAS NOT IN ACCORDANCE WITH THE
PRINCIPLES OF NATURAL JUSTICE.

IV. THE TRADES UNDERTAKEN BY DARCY ARE NOT IN VIOLATION OF

THE PIT REGULATIONS.

All of which is humbly submitted.

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

The Appellants shall duty bound forever pray.

SD/-
Counsel for Appellants

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