Apex court ruling may set precedent for various similar insider trading cases

21 Sep 2022 , 07:52 AM

According to news reports, the Supreme Court’s ruling in the insider trading case involving Gammon Infrastructure Projects may serve as a model for other similar cases that are now ongoing.

The Supreme Court ruled on Monday that simply having access to price-sensitive information and trading based on it are insufficient to prove insider trading allegations. According to the ruling, it is equally crucial to proving that the transaction’s motivation was to profit from insider knowledge.

In the words of the Supreme Court decision, “if a person participates in a transaction which is obviously expected to result in loss, he cannot be charged with insider trading.” Justices Indira Banerjee and V Ramasubramanian made up the two-judge panel that delivered the decision.

The key document in the dispute is a shareholder agreement that Simplex Infrastructure and Gammon India signed in 2012. Both businesses inked a commitment to invest 49% in each other’s projects after receiving contracts from the National Highways Authority of India to construct a number of highways.

However, these shareholding arrangements were cancelled on September 9, 2013. On September 22, 2013, Abhijit Rajan, one of Gammon’s promoters, sold 14.4 million shares of the business. However, stock markets were only notified of the project termination on September 30, 2013. Gammon became the sole owner of the road project following the announcement, which caused the share price to soar.

On the premise that Rajan had broken insider trading rules, Sebi had issued an order against him. Sebi approached the Supreme Court, which also maintained Rajan’s acquittal after the Securities Appellate Tribunal (SAT) decided in his favour in 2019.

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