Versus: Written Submission The Respondents

WRITTEN SUBMISSION for THE RESPONDENTS
TEAM CODE - 112
8th GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2024
BEFORE THE SECURITIES APPELLATE TRIBUNAL
CASE NO. ___/ 2023

JURISDICTION UNDER REGULATION 14(1) OF SECURITIES APPELLATE
TRIBUNAL RULES, 2000
APPEAL NO. __/2023
MR. KAPIL VARMA & ANR ….APPELLANTS

VERSUS
THE SECURITIES AND EXCHANGE BOARD OF INDIA …..RESPONDENT
Clubbed with
APPEAL NO. __/2023
PFTC & ORS. …. APPELLANTS

VERSUS
Clubbed with
APPEAL NO. __/2023
MR. TAPAN MANOJ & ANR ….APPELLANTS

VERSUS
----------------------------------------------------------------------------------------------------------------
WRITTEN SUBMISSION for THE RESPONDENT

---------------------------------------------------------------------------------------------------------------
1
TABLE OF CONTENTS
TABLE OF CONTENTS ......................................................................................................... 2
LIST OF ABBREVIATIONS .................................................................................................. 4
INDEX OF AUTHORITIES ................................................................................................... 6
STATEMENT OF FACTS ..................................................................................................... 10
STATEMENT OF JURISDICTION..................................................................................... 12
ISSUES RAISED.................................................................................................................... 13
SUMMARY OF ARGUMENTS ........................................................................................... 14
ARGUMENTS ADVANCED ................................................................................................ 16
WHETHER MR. KAPIL VARMA AND THE LOCAL BRAIN HAVE INDULGED IN
INSIDER TRADING? ......................................................................................................... 16
[A] Varma and TLB are “insiders” ................................................................................... 16
[B] Varma and TLB have traded on the basis of UPSI. .................................................... 17
[C] Principles of natural justice have not been violated in the present case .................... 18
II. WHETHER APPELLANTS HAVE VIOLATED ANY DISCLOSURE

REQUIREMENTS? ............................................................................................................. 20
[A] PFTC HAS ACQUIRED INDIRECT CONTROL OVER TECHAATMA DUE TO

THE LOAN AGREEMENT. ............................................................................................ 20
[B] KAPIL VARMA AND THE LOCAL BRAIN ARE IN VIOLATION OF LODR
REGULATIONS, 2015 AND PFUTP REGULATIONS, 2003 BY NOT DISCLOSING
THE LOAN AGREEMENT. ............................................................................................ 24
III. WHETHER MR. TAPAN MANOJ, TISHITA MEHTA AND TISHITA

COMMODITIES HAVE INDULDGED IN INSIDER TRADING? ................................... 28
[A] there is evidence of transmission and use of UPSI. ................................................... 28
[B] It can be inferred from circumstantial evidence that the noticees had access to UPSI
.......................................................................................................................................... 30
[C] Mens rea is not an essential factor for penalization. .................................................. 31
2
VI. WHETHER THE APPELLANTS HAVE INDULGED IN PRICE MANIPULATION 33
[A] The increase in price is well-planned and orchestrated ............................................. 33
[B] Collusion has occurred among the implicated parties ................................................ 34
[C] The manipulative trades have not been carried out in the due course of business. .... 34
[D] Mr Tapan has failed to disclose his conflict of interest. ............................................. 35
PRAYER ..................................................................................... Error! Bookmark not defined.
3
LIST OF ABBREVIATIONS
Sr. No. Abbreviations Full Form

1. & And
2. AI Artificial Intelligence
3. AIR All India Reporter
4. Anr. Another
5. Bom. Bombay
6. CEO Chief Executive Officer
7. CFD Corporate Finance Division
8. Co. Company
9. COMPL Complaints
10. Corp. Corporation
11. e.g. Example
12. Etc. Etcetera
13. Feb. February
14. GM General Manager
15. Gov. Government
16. HC High Court
17. i.e. Id est
18. ID Initial Disclosure
19. ITR Income Tax Reports
20. IVD Issuers and Securities Market Division
21. LODR Listing Obligations and Disclosure Requirements
22. Ltd. Limited
23. M/s Messieurs
24. Mar. March
25. Misc. Miscellaneous
26. Mr. Mister
27. MSK Welspun Projects Limited
28. NW Network
29. Ors. Others
4
30. Para Paragraph

31. PFTC Peterfat Trading Company
32. PFUTP Prohibition of Fraudulent and Unfair Trade Practices
33. PIT Prohibition of Insider Trading
34. Pt. Part
35. Pvt. Private
36. Rs. Rupees
37. SAST Substantial Acquisition of Shares and Takeovers
38. SAT Securities Appellate Tribunal
39. SC Supreme Court
40. SCC Supreme Court Cases
41. SCL SEBI and Corporate Law
42. SCN Show Cause Notice
43. SEBI Securities and Exchange Board of India
44. Sec. Section
45. Sept. September
46. T. N Tamil Nadu
47. TLB The Local Brain
48. UPSI Unpublished Price Sensitive Information
49. v. Versus
50. WTM Whole Time Member
51. ZOCD Zero Coupon Debt
5
INDEX OF AUTHORITIES
Books
ALAN R. BROMBERG AND LEWIS D. LOWENFELS, BROMBERG & LOWENFELS

ON SECURITIES FRAUD & COMMODITIES FRAUD, § 6:166 (2nd ed.,
Shepard's/McGraw-Hill 2001)
JAMES ROBERT BROW, THE REGULATION OF CORPORATE DISCLOSURE 5.01 (3rd

ed., Wolters Kluwer 1995
N.S. BINDRA, N.S. BINDRA’S INTERPRETATION OF STATUTUES, 775(10th ed., Lexis

Nexis, 2006
PETER MAXWELL, BRIAN GALPIN AND ROY WILSON, INTERPRETATION OF

STATUTES 36,315- 316 (11th ed. 1962)
Case Laws
Anand Rathi & Ors. v. SEBI, 2002 (2) BOM CR 403 ………………………………………18
Balram Garg v. SEBI, 9 SCC 425 (2022) ……………………………………………………28
Chairman, SEBI v. Shriram Mutual Fund, (2006) 5 SCC 361 ………………………………26
Collector of Central Excise, New Delhi v. Bhagsons Paint Industry (India), AIRONLINE
2003 SC 472 ………………………………………………………………………………....21
Liberty Oil Mills & Ors. v. Union of India & Ors, 1984 (3) SCC 465 …………………… 18
Mahadevan v. M.D., T.N. Housing Board, (2005) 6 SCC 636 ………………………………21
N. Narayan v. Adjudicating Officer (SEBI), (2013) 12 SCC 152 ………………………… 33
SEBI v. Cabot International Capital Corporation, 2004 SCC OnLine Bom 180 ………… 26
SEBI v. Kanaiyalal Baldev Bhai Patel (2018) 13 SCC 753 …………………………………35
SEBI v. Kanaiyalal Baldev Bhai Patel, 2017 SCC OnLine SC 1148 ……………………… 24
SEBI v. Kishore R Ajmera, 5 (2016) 6 SCC 368 ………………………………………....... 23
SEBI v. Rakhi Trading Private Ltd. (2018) 13 SCC 753 ………………………………… 24
SEBI v. Skdc Consultants Ltd., 2004 SCC Online BOM 1318 …………………………… 26
State of Andhra Pradesh v. N. Radhakrishnan, (1998) 4 SCC 154 ………………….………21
6
Dictionary
3 P RAMANATHA AIYAR,THE MAJOR LAW LEXICON (4th ed., Lexis Nexis,

Butterworths Wadhwa, Nagpur, 2010)
Other Authorities / Internet Documents
“Insider Trading: Circumstantial Evidence is Evidence Enough?” available at

https://repository.nls.ac.in/cgi/viewcontent.cgi?article=1083&context=nlsir .………………31
Amendments to requirements for disclosure of material events or information by listed

entities under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
available at https://www.sebi.gov.in/sebi_data/meetingfiles/apr-2023/1681703089597_1.pdf
..................................................................................................................................................25
Research Report on, A Review Of Indian Insider Trading Cases, Moneylife Foundation
available at https://www.mlfoundation.in/media/uploads/article/pdf/1667978689685.pdf ....29
SEBI finds it difficult to crack down on insider trading, October 21, 2009
https://economictimes.indiatimes.com/sebi-finds-it-difficult-to-crack-down-on-insider-
trading/articleshow/5143683.cms?from=mdr ………………………………………………31
SEBI Reports/ Circulars
Report Of The High-Level Committee To Review The SEBI (Prohibition Of Insider Trading)
Regulations, 1992 (N.K. Sodhi), SEBI (December 7, 2013) ………………………………. 30
Report of the High-Powered Committee on Stock Exchange Reforms (G.S. Patel), SEBI, 1986
https://www.sebi.gov.in/sebi_data/attachdocs/1321419837830.pdf ........................................28
SAT Cases
Bhorukha Financial Services Ltd. v. SEBI, 2006 SCC Online SAT 163 ………………..… 20
DSQ Holdings Limited v. SEBI, [2005]60SCL156(SAT) ……………………………… …16
7
HB Stockholdings Ltd. v. SEBI, 2013 SCC Online SAT 56 ………………………..……… 21
Hindustan Lever Ltd v. SEBI, (1998) 18 SCL 311 MOF ……………………………………17
Libord Finance Ltd. v. SEBI, 2008 SCC Online SAT 46 ……………………………………21
Pyramid Saimira Theatre Ltd v. SEBI, 2010 SCC Online SAT 146 ……………………… 26
Rajiv Gandhi v. SEBI, 2008 SCC OnLine SAT 78 ………...……………………………… 16
Rakesh Agarwal v. SEBI, (2004) 49 SCL 351 (SAT) ……………………………………….32
Ravi Mohan & Ors. v. SEBI, 2015 SCC Online SAT 112 ………………………………… 21
Samir C. Arora v. SEBI, [2005] 59 SCL 96 (SAT) ………………………………………… 29
Subhkam Securities Pvt. Ltd. v. SEBI, (2010) SCC Online SAT 35 ………………………..21
Unpublished SAT Orders
North Ends Foods Marketing Pvt. Ltd. v. SEBI, SAT Appeal No. 80 of 2019 (Mar 12, 2019)
https://sat.gov.in/english/pdf/E2019_JO201980.PDF .............................................................18
SEBI Orders
Final Order in the matter of Divis Laboratories Ltd. in respect of Mr. Srinivas Maddineni,
WTM/AB/IVD/ID3/9771/2020-21, https://www.sebi.gov.in/enforcement/orders/dec-
2020/final-order-in-thematter-of-divis-laboratories-ltd-in-respect-of-mr-srinivas-maddineni-
_48408.html .............................................................................................................................29
Order In Matter of KLG Capital Services Limited, WTM/GM/EFD-DRA1/ISD/9769/2020-

21, https://www.sebi.gov.in/enforcement/orders/nov2019/order-in-the-matter-of-klg-capital-
services-limited_44874.html ...................................................................................................28
Order In Matter of Mishka Finance and Trading Limited & Ors, WTM/RKA/ISD/116/2016,
https://www.sebi.gov.in/sebi_data/attachdocs/1472218822636.pdf .......................................18
Order in Matter of Zylog Systems Limited & Ors, WTM/PS/50/ISD/JUL/2015, available at

8
SEBI Order In Matter of Atlanta Ltd, 2007 SCC OnLine SEBI 236 ……………………… 31
SEBI Order In Matter of Biocon Ltd, 2021 SCC OnLine SEBI 1082 ………………………31
SEBI Order In Matter of Kunal Ashok Kashyap, 2021 SCC OnLine SEBI 175 …………....31
SEBI Order In the matter of Reliance Petro Investments Limited, ORDER NO. AO/SG-
AS/EAD/15/2016 https://www.sebi.gov.in/sebi_data/attachdocs/1457451377191.pdf ..........29
SEBI Order in the matter of Stock Recommendations using YouTube in the scrip of Sadhna
Broadcast Limited, WTM/AN/ISD-SEC-1/29722/2023-24,
https://www.sebi.gov.in/enforcement/orders/oct-2023/confirmatory-order-in-the-matter-of-
stock-recommendations-using-youtube-in-the-scrip-of-sadhna-broadcast-limited_78612.html
..................................................................................................................................................35
SEBI order In the scrip of CRISIL Ltd, 2019 SCC OnLine SEBI 402 …………………… 31
SEBI Order In the scrip of TATA Finance ltd, WTM/VKC/ ID5/ 119/08,
Settlement Order in Matter of Manappuram Finance Ltd, Order/VV/JR/2020-21/8229,

https://www.sebi.gov.in/enforcement/orders/jul-2020/settlement-order-in-respect-of-
manappuram-financeltd-in-the-matter-of-manappuram-finance-limited_47024.html ............29
Statutes/ Regulations
Securities and Exchange Board of India (Listing Obligations and Disclosure Requirement)
Regulations, 2015
Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices
relating to Securities Market) Regulations, 2003
Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015
Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers)
Regulations, 1997
Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011
Securities and Exchange Board of India Act, 1992.
9
STATEMENT OF FACTS
1. Formation of PFTC: Mr. Tapan Manoj (hereinafter, “Mr. Manoj”), originally from
Ahmedabad, moved to Mumbai and initially worked with a large brokerage firm, gaining
experience under seasoned brokers. He then registered with the Securities and Exchange
Board of India, (hereinafter, “SEBI”) as a stockbroker and started his own firm, Peterfat
Trading Company Limited (hereinafter, “PFTC”).
2. Formation of Key Relationships: At a party in 2012, Mr. Manoj met Mr. Kapil Varma
(hereinafter, “Mr. Varma”), a multimillionaire businessman, and his wife, Ms. Tishita
Mehta, a successful commodities trader. They bonded over mutual interests in the stock
market. Professionally, Mr. Manoj became the sole stockbroker for Mr. Varma, and he also
invested heavily in Tishita Commodities Private Limited (hereinafter, “Tishita
Commodities”) Tishita Mehta's commodities brokerage firm, acquiring a 25% stake by
2016 and becoming a non-executive director.
3. Manoj's Investment in Tishita Commodities: By 2016, Mr. Manoj had a significant 25%
ownership stake in Tishita Commodities. He also became head of the “other investments”
department within the company, overseeing proprietary stock and commodities
investments .
4. Techaatma's AI Venture and Struggles: Techaatma Limited (hereinafter,

“Techaatma”), a tech company led by Mr. Varma, had previously been a leader in the tech
space but faced financial difficulties due to increasing competition and labor strikes.
Techaatma began a new venture into the AI space but struggled due to financial losses,
downgraded credit ratings, and difficulties in securing funding from banks .
5. Manoj's Loan to Techaatma: In a bid to support Mr. Varma and Techaatma, Mr. Manoj
arranged a loan of INR 100 crore from New India Finance (hereinafter, “NIF”) through a
loan-against-shares facility. He then channeled this loan into The Local Brain (hereinafter,
“TLB”), a holding company of Mr. Varma, to fund Techaatma's AI division .
6. Techaatma Launches AI-Powered Video Platform: By 2019, Techaatma had made

significant progress in the AI sector and launched a beta version of an AI-powered platform
for video content creation. This platform transformed the video production process into a
fully digital operation, garnering attention from investors and tech influencers .
7. Techaatma's Expansion and Acquisition Talks: After stabilising financially by 2020,

Techaatma explored expanding its operations through acquisitions. In early 2021,
10
Techaatma formed an acquisition committee, and by mid-year, it was in talks to acquire

Trebleclef Limited (hereinafter, “Trebleclef”) a company specialising in AI-based music
production software.
8. Repayment of loan via Sale of Techaatma Shares: In June 2021, the repayment of the
first tranche of the loan provided by PFTC to TLB became due. Unable to sell certain
assets, Mr. Varma sold INR 10 crore worth of Techaatma shares in the open market to raise
funds for repayment .
9. Approval of Merger with Trebleclef: In November 2021, the boards of Techaatma and
Trebleclef approved their merger with a swap ratio of 4:1. After the announcement of the
merger, the share price of Techaatma dropped unexpectedly by 10%.
10. SCN 1 and Insider Trading Allegations: In March 2022, SEBI launched an investigation
and issued a show cause notice, (hereinafter, “SCN”) to TLB and Mr. Varma for alleged
insider trading and violations of SEBI regulations related to the sale of Techaatma shares.
SEBI imposed trading restrictions and froze bank accounts linked to these entities .
11. NIF Discovers diversion of loan: In April 2022, NIF discovered that the loan they
provided to PFTC, intended for working capital, had been diverted to TLB for Techaatma's
benefit. This breach of the loan agreement led NIF to recall the remaining loan amount .
12. SCN 2 and Control Allegations: In 2023, SEBI issued a second show cause notice (SCN)
to PFTC and TLB, alleging that PFTC had gained indirect control over Techaatma due to
the loan agreement. SEBI directed PFTC to make a public offer to acquire shares in
Techaatma .
13. SCN 3 Price Manipulation and Insider Trading: SEBI’s third show cause notice in
March 2023 implicated TCPL, Mr. Manoj, and Ms. Mehta in manipulative trading
practices in Techaatma's stock. SEBI ruled that these entities had engaged in price
manipulation and insider trading, leading to penalties.
14. Securities Appellate Tribunal: The Securities Appellate Tribunal (hereinafter, “SAT”)
then decided to hear the three relevant appeals together.
11
STATEMENT OF JURISDICTION
The Respondent has the honour to submit before the Hon’ble Securities Appellate Tribunal the
memorandum for Respondent in the case of Kapil Varma & Ors. v. Securities and Exchange
Board of India, under Rule 14(1) of the Securities Appellate Tribunal (Procedure) Rules, 2000.
12
ISSUES RAISED
ISSUE I : WHETHER MR. KAPIL VARMA AND THE LOCAL BRAIN HAVE
INDULGED IN INSIDER TRADING?
ISSUE II : WHETHER APPELLANTS HAVE VIOLATED ANY DISCLOSURE

REQUIREMENTS?
ISSUE III : WHETHER MR. TAPAN MANOJ, TISHITA MEHTA AND TISHITA
COMMODITIES HAVE INDULDGED IN INSIDER TRADING?
ISSUE IV : WHETHER THE APPELLANTS HAVE INDULGED IN PRICE

MANIPULATION
13
SUMMARY OF ARGUMENTS
ISSUE I : WHETHER MR. KAPIL VARMA AND THE LOCAL BRAIN HAVE
The Counsel submits that Mr. Varma and TLB engaged in insider trading, violating the SEBI
Act and insider trading regulations. Defined as "insiders," Varma and TLB possessed
Unpublished Price Sensitive Information (UPSI) about Techaatma’s merger with Trebleclef,
which they used to sell shares prior to the public announcement, thus avoiding potential losses.
The burden of proof lies with the accused to demonstrate they were not in possession of UPSI,
which they failed to do. The Counsel argues that SEBI's ex-parte interim orders, issued during
an investigation, adhered to principles of natural justice, allowing for post-decisional hearings.
SEBI acted appropriately to protect investors and maintain market integrity. Thus, it is
concluded that Varma and TLB violated regulations and should face penalties as per SEBI
provisions.
ISSUE II. WHETHER APPELLANTS HAVE VIOLATED ANY DISCLOSURE

REQUIREMENTS?
The Respondent submits that Mr. Varma and TLB violated disclosure requirements by failing
to disclose a Loan Agreement through which PFTC acquired indirect control over Techaatma.
This omission breaches Regulation 30 of the LODR Regulations, 2015, and the PFUTP
Regulations, 2003, necessitating an open offer under the Takeover Code. The Loan Agreement
granted PFTC significant influence over Techaatma’s strategic decisions and corporate actions,
misleading investors about the company’s control and financial status. The timing of the
disclosure is irrelevant to SEBI's authority to act. Thus, SEBI's penalties are warranted to
uphold market integrity, and the Appellants' appeal should be dismissed.
ISSUE III : WHETHER MR. TAPAN MANOJ, TISHITA MEHTA AND TISHITA
The Respondents submits that Mr. Tapan Manoj, Ms. Tishita Mehta, and Tishita Commodities
engaged in insider trading using Unpublished Price Sensitive Information (UPSI) from a Loan
Agreement. Manoj is classified as an insider due to his involvement in the agreement, while
Mehta, with close ties to company management, is seen as a connected person. Tishita
Commodities is implicated through Manoj's role as a director. Circumstantial evidence,
14
including frequent communication among the parties, suggests insider trading, as direct proof
is often unavailable. The law presumes that insiders trade on UPSI unless they can prove
otherwise. The evidence indicates that the noticees traded based on privileged information,
leading to unfair profits.
ISSUE IV : WHETHER THE APPELLANTS HAVE INDULGED IN PRICE

MANIPULATION
The Respondents submits that the Appellants engaged in price manipulation of Techaatma’s
stock through a coordinated scheme. Mr. Tapan Manoj allegedly orchestrated this by using his
stake in Tishita Commodities to conduct collusive trading, resulting in artificially inflated
prices. Evidence shows that Mr. Tapan’s public endorsements coincided with significant price
increases. Trading patterns reveal intentional low-volume orders and closely timed
transactions, indicating premeditated efforts to inflate stock prices. Additionally, Mr. Tapan
failed to disclose his conflict of interest, providing biased information about Techaatma without
revealing his financial ties. This lack of transparency aligns with previous regulatory actions
for misleading investors. Overall, the Respondents argue that these manipulative actions
undermine market integrity and demonstrate the Appellants' guilt.
15
ARGUMENTS ADVANCED
I. WHETHER MR. KAPIL VARMA AND THE LOCAL BRAIN HAVE

1. The Counsel on behalf of the Respondent humbly submits that Mr. Kapil Varma
(hereinafter, “Mr. Varma”) and The Local Brain Limited (hereinafter, “TLB”) have
indulged in insider trading and therefore have violated Section 12 A (e) of the Securities
and Exchange Board of India Act, 1992 (hereinafter, “SEBI Act”), and Regulation 4(1) of
SEBI (Prohibition of Insider Trading) Regulations, 2015 (hereinafter, “PIT Regulations,
2015”). The noticees are “insiders” [A] and have traded on the basis of Unpublished Price
Sensitive Information (hereinafter, “UPSI”) [B] principles of natural justice have not been
violated in the present case [C]
[A] Varma and TLB are “insiders”
2. Regulation 2(g) of the PIT Regulations, 2015 defines an insider as any person who is “a
connected person” or “in possession of or having access to UPSI”. UPSI is defined under
Regulation 2(n) of the same statute as “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 financial results; dividends; change in capital
structure; mergers, de-mergers, acquisitions, delistings, disposals and expansion of
business and such other transactions; changes in key managerial personnel.
3. The definition of UPSI includes information related to mergers. Mr. Varma and TLB were
aware of Techaatma’s merger with Trebleclef, yet they proceeded to sell their shares while
holding this information. In DSQ Holdings Limited v. SEBI1 it has been held that a person
who receives UPSI is clearly in a more advantageous position than other investors and
therefore is an insider. In the case of Rajiv B. Gandhi v. SEBI2 (hereinafter, “Rajiv Gandhi
case”), this Tribunal emphasised that an insider is not only limited to individuals in formal
relationships with the company but also includes anyone who has access to UPSI. This
1
DSQ Holdings Limited v. SEBI, [2005]60SCL156(SAT).
2
Rajiv Gandhi v. SEBI, 2008 SCC OnLine SAT 78.
16
judgment reiterated that possession of such information, irrespective of how it was

acquired, qualifies a person as an insider.
4. Mr. Varma being the Promoter, Managing Director and CEO of Techaatma, and TLB being
a promoter/promoter group entity evidently possessed UPSI regarding Techaatma’s merger
with Trebleclef. Therefore, based on the facts, the Respondent humbly submits that Mr.
Varma and TLB meet the definition of “insiders” as under Regulation 2(g) of the the PIT
Regulations, 2015.
[B] Varma and TLB have traded on the basis of UPSI.
5. Regulation 4(1) of the PIT Regulations, 2015 states that no insider shall trade in securities
that are listed or proposed to be listed on a stock exchange when in possession of UPSI.
The explanation to this regulation further iterates that when a person who has traded in
securities has been in possession of UPSI, his trades would be presumed to have been
motivated by the knowledge and awareness of such information in his possession.
6. Regulation 4(2) of the PIT Regulations, 2015 state that in the case of connected persons
the onus of establishing, that they were not in possession of UPSI, shall be on such
connected persons. In the case of Rajiv B. Gandhi v. SEBI3, the SAT has ruled that when
an insider engages in trading the securities of a listed company, it is presumed by law that
the trade was based on UPSI, and the burden of proving otherwise rests on the insider.
7. Varma and TLB sold shares in the open market in the months of June and July 2021 while
holding information about the impending merger between Techaatma and Trebleclef,
which was not yet public knowledge. Later, when the merger was announced, the prices of
shares of Techaatma unexpectedly fell by 10% in terms of closing price.4 This clearly
indicates that the noticees deliberately sold the shares to avoid potential losses from the
sharp decline in share value.
8. In the case of Hindustan Lever Limited v. SEBI5, it was argued that to establish a charge
of insider trading, it must be demonstrated that there was an abuse of fiduciary position
and that the transactions were conducted for profit or to prevent a loss. However, this
Tribunal rejected these arguments, stating that such proof is not “essential” and found the
appellants guilty of insider trading.
3
Supra note 2.
4
Moot problem paragraph number 10.
5
Hindustan Lever Limited v. SEBI , [1998] SCL 311.
17
[C] Principles of natural justice have not been violated in the present case
9. The authority of SEBI to issue ex-parte ad interim orders is derived from Section 11(1) of
the SEBI Act, 1992. This provision imposes a duty on SEBI to safeguard the interests of
investors in securities, promote the development of, and regulate the securities market, by
taking any measures it deems appropriate. SEBI’s authority to issue ex-parte ad-interim
orders is encompassed within Section 11(4) read with Section 11B of the SEBI Act.
Specifically, under Section 11(4), SEBI is empowered to issue directions either after
completing or while conducting an investigation or inquiry against (i) any intermediary,
(ii) any person associated with the securities market, or (iii) any company violating the
provisions of the SEBI Act.
10. SEBI holds the authority to issue urgent ex-parte ad interim orders in order to prevent grave
harm to the capital market including investors. The Supreme Court in the case of Liberty
Oil Mills & Ors. v. Union of India & Ors.6 ruled that the urgency to issue ex-parte ad
interim orders must be guided by factors such as widespread misuse and attempts to
monopolize or corner the market. The Supreme Court emphasized that regulatory agencies
must act promptly to prevent further misconduct and take swift measures to restore
confidence in the capital market.
11. In the case of Anand Rathi & Ors. v. SEBI7, it was held that while ex-parte ad interim
orders can be issued without a pre-decisional hearing or the order itself providing for a
post-decisional opportunity, the principles of natural justice, which are never excluded,
will be upheld if a post-decisional hearing is granted upon request. This view was further
reiterated in the cases of In Re: Zylog Systems Limited and Ors.8 and In Re: Mishka
Finance and Trading Limited and Ors.9
12. In the case of North End Foods Marketing Pvt. Ltd. v. liberty SEBI10, the SAT ruled that
while issuing an interim order, the principles of natural justice must be observed, meaning
that an opportunity for a hearing must be provided. However, a pre-decisional hearing is
not always required when ex-parte ad interim orders are issued during an ongoing
6
Liberty Oil Mills & Ors. v. Union of India & Ors, 1984 (3) SCC 465.
7
Anand Rathi & Ors. v. SEBI, 2002 (2) BOM CR 403.
8
Order in Matter of Zylog Systems Limited & Ors, WTM/PS/50/ISD/JUL/2015, available at
https://www.sebi.gov.in/sebi_data/attachdocs/1465299268841.pdf
9
Order In Matter of Mishka Finance and Trading Limited & Ors, WTM/RKA/ISD/116/2016,
10
North Ends Foods Marketing Pvt. Ltd. V. SEBI, SAT Appeal No. 80 of 2019 (Mar 12, 2019)
https://sat.gov.in/english/pdf/E2019_JO201980.PDF
18
investigation or inquiry, unless mandated by statute. In such instances, the principles of

natural justice are upheld if the affected party is granted a post-decisional hearing.
13. In the present case, SEBI initiated an investigation in March 2022 regarding the trading by
some suspected entities in the scrip of Techaatma around the time of the merger of
Techaatma and Trebleclef. Subsequently, an interim order was passed, requiring the
noticees to file their replies or objections, if any, within 21 days from the date of receipt of
the order. The noticees were further directed to indicate whether they wish to avail
themselves of the opportunity for a personal hearing, which shall be scheduled on a date
and time to be fixed upon a specific request made in that regard.11 A confirmatory order
dated March 29, 2023 was passed only after hearing the noticees. Hence, it is humbly
submitted by the Respondent that no principle of natural justice has been violated and
sufficient opportunity for hearing was provided to Mr. Varma and TLB.
14. Summarizing, Mr. Varma and TLB are insiders and have violated Section 12A(e) of the
SEBI Act, and Regulation 4(1) of the PIT Regulations, 2015, and are therefore liable to be
penalised. SEBI was justified to take action under Sections 11 (1), 11 B and 11 (4) of the
SEBI Act.
11
Moot problem paragraph 13.
19
II. WHETHER APPELLANTS HAVE VIOLATED ANY DISCLOSURE

REQUIREMENTS?
15. The Respondent humbly submits that Mr. Varma and TLB has violated disclosure
requirements. This argument is twofold. Firstly, PFTC has acquired indirect control over
Techaatma due to the Loan Agreement [A]. Secondly, Mr. Varma and TLB are in violation
of Regulation 30 of LODR Regulations, 2015, Regulation 3 and 4 of PFUTP Regulations,
2003 read with Sec. 12A of SEBI Act, 1992 by not disclosing the Loan Agreement [B].
[A] PFTC HAS ACQUIRED INDIRECT CONTROL OVER TECHAATMA DUE TO

THE LOAN AGREEMENT.
16. The Counsel for the Respondent humbly submits that, PFTC has acquired indirect control
over Techaatma due to the Loan Agreement. Thus, as a consequence PTFC was required
to make an open offer in terms of Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulations, 2011 (hereinafter, ‘Takeover Code’)
as by the virtue of the clauses of the Loan Agreement indirect control has been acquired by
PFTC over Techaatma.
Preliminary issue over Jurisdiction
17. The Appellants have raised a preliminary contention that the proceedings initiated by SEBI
were entirely without jurisdiction as the “reasonable grounds to believe”, as required to be
recorded prior to initiating investigation under Sec. 11C of the SEBI Act, 1992 had not
been demonstrated to the Appellants. It is humbly submitted that it is nowhere mandated
in the SEBI Act that existence of reasonable grounds for initiating an investigation must be
first demonstrated to the person against whom any action is initiated pursuant to
completion of such proceeding. As held by the Hon’ble SAT in Bhorukha Financial
Services Ltd. v. SEBI12, “Investigation by itself does not adversely affect any person or
intermediary and no civil consequences flow from such an order.” It is to be noted that the
SCN has not been issued on the basis of “reason to believe for conducting investigation”
and rather is based on the facts found during the investigation.
12
Bhorukha Financial Services Ltd. v. SEBI, 2006 SCC Online SAT 163.
20
18. The Appellants have argued that Sections 11(1), 11(4), and 11B of the SEBI Act, 1992,
being preventive or remedial, should not apply to alleged non-disclosures of agreements
from a long period of time ago. However, SEBI’s regulatory discretion allows for the
initiation of proceedings based on the facts of each case, regardless of the age of the
agreements. The ongoing nature of the alleged fraudulent acts further justifies proceeding
under the relevant SEBI provisions.
19. The Appellants also claimed delays in proceedings have impaired their defense, citing
various judicial precedents. However, the SEBI Act does not specify a limitation period for
initiating actions. The relevant date is when SEBI became aware of the violation, not the
date of the violation. In State of Andhra Pradesh v. N. Radhakrishnan13 and P. V.
Mahadevan v. M.D., T.N. Housing Board14, the Supreme Court held that delay must be
assessed based on the specific facts of each case, without a universal principle. SAT
decisions in Subhkam Securities Pvt. Ltd. v. SEBI15, Libord Finance Ltd. v. SEBI16, and
HB Stockholdings Ltd. v. SEBI17 reinforce that delay alone does not invalidate
proceedings. Hence, in the present case, the Appellants’ claims regarding delay are
unfounded.1819
Rationale behind the entire arrangement

20. The Counsel for the Respondent humbly submits that the conjoint reading of the facts and
circumstances involved in this case brings out its uniqueness and leads that the PFTC did
indirectly acquire control in Techaatma, by entering into the Loan agreement and the Call
Option agreements, thereby obligating it to make a public announcement of an open offer
under Regulation 4 read with regulation 13 of SEBI (SAST) Regulations, 2011.
Relevant clauses of Loan Agreement and the parallel call option agreements
21. The call option allows PFTC to acquire up to 99.99% of Techaatma’s equity shares. This
provision provides a pathway to nearly total ownership, which equates to effective control
of the company. The potential to exercise this option, even though contingent on the share
price increasing, represents a significant influence over Techaatma’s future. The existence
13
State of Andhra Pradesh v. N. Radhakrishnan, (1998) 4 SCC 154.
14
Mahadevan v. M.D., T.N. Housing Board, (2005) 6 SCC 636.
15
Subhkam Securities Pvt. Ltd. v. SEBI, (2010) SCC Online SAT 35.
16
Libord Finance Ltd. v. SEBI, 2008 SCC Online SAT 46.
17
HB Stockholdings Ltd. v. SEBI, 2013 SCC Online SAT 56.
18
Ravi Mohan & Ors. v.. SEBI, 2015 SCC Online SAT 112.
19
Collector of Central Excise, New Delhi v. Bhagsons Paint Industry (India), AIRONLINE 2003 SC 472.
21
of such a call option gives PFTC substantial leverage over Techaatma. The Borrower might
feel pressured to act in ways that favor PFTC to avoid the possibility of losing control of
the company, thus creating indirect control through economic influence.
22. The protective covenants grant PFTC veto rights over crucial decisions, such as issuing
new equity shares, altering share capital, and amending charter documents. These rights
ensure that PFTC can prevent significant changes or actions that could affect the value of
its investment or its ability to be repaid. This level of influence over key corporate actions
suggests indirect control. PFTC’s approval is required for the development of new AI
products and other strategic initiatives. This level of control over the company's strategic
direction means PFTC can shape or limit Techaatma’s growth and operational focus,
thereby exerting indirect control over its business strategy.
23. The financial terms of the loan, including the potential for discounts on the interest rate,
are tied to specific repayment conditions. PFTC’s influence over financial decisions, such
as allowing early repayment with discounts, impacts the Borrower's financial flexibility
and planning. This economic control can indirectly influence business decisions and
operations. The agreement specifies events of default, such as non-payment or breach of
covenants, which could lead to significant consequences for Techaatma. The potential for
such defaults and their repercussions gives PFTC leverage over the Borrower’s financial
stability and decisions.
24. The Borrower is required to provide PFTC with detailed updates and information regarding
the AI Division and other significant developments. This reporting requirement ensures
that PFTC remains informed about critical aspects of Techaatma’s operations, allowing it
to exert influence through informed oversight. The requirement for PFTC’s approval before
undertaking any development of new AI products demonstrates control over a core area of
Techaatma’s business. This control over product development and strategic initiatives can
significantly impact the company’s direction and market position.
“Control” under Takeover Code
25. The essential ingredients as defined under Regulation 2(1)(e)20 are satisfied in the present
facts and circumstances of the case. Section 2(1)(e) of the SAST Regulation defines that
the control includes the right to appoint majority of the directors or to control the
management or policy decisions exercisable by a person or person acting individually or
Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011,
20
Gazette of India, pt. III. Sec. 4 (Sept. 23, 2011).

22
in concert, directly or indirectly, including by virtue of their shareholding or management

rights or shareholders agreements or voting agreements or in any other manner which in
the instant case is evident that shows PFTC has control over Techaatma through the
aforesaid ingredients as per regulation 2(1)(e) of the SAST Regulations.
26. This further strengthens the view that the PFTC Loan Agreements were very material and
price sensitive information as they effectively involved passing of controlling stake of 26%
share capital of Techaatma and stipulated various conditions binding the promoters of
Techaatma with respect to their dealing in the shares of Techaatma, capital restructuring of
Techaatma, etc. The minority shareholder of Techaatma and general investors of securities
market were entitled to know such crucial transactions carried out by the promoters which
involved transferring the rights over a substantial stake by the promoters to a third party.
However, Appellants apparently did not want the general investors to know about the
transfer of their shares of Techaatma and other associated rights to PFTC. These
transactions were deliberately structured by the Appellants as loan transactions so as to
conceal the said sale of stake in Techaatma. Accordingly, the transaction was devised in a
way to avoid the said information getting known to the investors, and to ensure that
investors continue to trade in the shares of Techaatma unaware of these material and price
sensitive developments.
Legal precedents that interpreted the provisions of SEBI Act
27. In this regard, reference may be made to the case of SEBI Kishore v. R Ajmera21, wherein
Hon’ble Supreme Court have laid down the guiding principle for understanding and
interpreting the provisions of SEBI Act and the regulations made thereunder in the
following words: “The SEBI Act and the Regulations framed there under are intended to
protect the interests of investors in the Securities Market which has seen substantial growth
in tune with the parallel developments in the economy. Investors' confidence in the
Capital/Securities Market is a reflection of the effectiveness of the regulatory mechanism
in force. All such measures are intended to pre-empt manipulative trading and check all
kinds of impermissible conduct in order to boost the investors' confidence in the Capital
market. The primary purpose of the statutory enactments is to provide an environment
conductive to increased participation and investment in the securities market which is vital
to the growth and development of the economy. The provisions of the SEBI Act and the
21
Kishore v. R Ajmera, 5 (2016) 6 SCC 368.
23
Regulations will, therefore, have to be understood and interpreted in the above light” 22.
The aforesaid guiding principle has been endorsed in the subsequent judgments of the
Hon’ble Supreme Court in in the case of SEBI v. Kanaiyalal Baldev Bhai Patel23 and
SEBI v. Rakhi Trading Private Ltd.24.
28. Hence, it is evident that PFTC's acquisition of indirect control over Techaatma through the
Loan Agreement and associated Call Option Agreements necessitated an open offer under
the SAST Regulations, 2011. The Loan Agreement, in conjunction with the Call Option
Agreements, provided PFTC with significant influence over Techaatma’s equity, strategic
decisions, and overall business operations, thereby satisfying the criteria for "control" as
defined under Regulation 2(1)(e) of the Takeover Code. This influence includes, but is not
limited to, the right to appoint directors, control management decisions, and impose
significant restrictions on the company's operations.
29. Moreover, the Loan Agreements involved critical, price-sensitive information related to
the transfer of a substantial stake in Techaatma, which was structured to conceal the true
nature of the transaction from the public and investors. As established by the guiding
principles set forth in SEBI Kishore v. R Ajmera25, the SEBI Act and its regulations aim
to safeguard investor interests and ensure market transparency. The Court emphasized that
regulatory measures must prevent manipulative practices and ensure investor confidence
in the capital market. Given the substantial influence exerted by PFTC, as evidenced by
the contractual covenants and strategic controls, the need for a public open offer26was both
a regulatory obligation and a necessary measure to uphold market integrity and protect
investor interests. Therefore, the Respondent's position is firmly grounded in the legal
requirements of the Takeover Code, reinforcing that PFTC was indeed required to make an
open offer in accordance with the SEBI regulations.
[B] KAPIL VARMA AND THE LOCAL BRAIN ARE IN VIOLATION OF LODR
REGULATIONS, 2015 AND PFUTP REGULATIONS, 2003 BY NOT DISCLOSING THE
LOAN AGREEMENT.
30. The Counsel for the Respondent most humbly submits that Mr. Varma and TLB are in
violation of Regulation 30 of LODR Regulations, 2015, Regulation 3 and 4 of PFUTP
22
Supra note 21.
23
SEBI v. Kanaiyalal Baldev Bhai Patel (2018) 13 SCC 753.
24
SEBI v. Rakhi Trading Private Ltd. (2018) 13 SCC 753.
25
Supra note 21.
26
Open Offer as per Regulation 4, 13, 32 and 35 of Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulations, 2011, Gazette of India, pt. III. Sec. 4 (Sept. 23, 2011).
24
Regulations, 2003 read with Sec 12A of SEBI Act, 1992 as such disclosure of impugned
Loan Agreement was necessary. As submitted in former part of the issue, PFTC has
acquired indirect control over Techaatma. Hence, any non-disclosure of Loan Agreement
amounts to violation of said provisions.
Listing Obligations and Disclosure Requirements) Regulations, 2015
31. The Respondent humbly submits that the Appellants have violated Regulation 30 of LODR
Regulation, 2015. Regulation 30 (3) states “The listed entity shall make disclosure of
events specified in Para B of Part A of Schedule III, based on application of the guidelines
for materiality, as specified in sub-regulation (4).” Further Para B of Part A mentions Loan
Agreement. Hence, Loan Agreement are documents deemed to be disclosed as per
Regulation 30(3) by the manner provided under Regulation 30(4). Regulation 30(4)(b)
states that any listed entity shall consider the materiality of events/information based on
the premises that the omission of an event or information is likely to result in significant
market reaction if the said omission came to light at a later date.
32. Regulation 30 of LODR mandates that listed entities must disclose any material events or
information that could affect the market price of their securities or influence investors'
decisions27. A loan agreement that results in a change of control or significant influence
over a company is considered material. By not disclosing the Loan Agreement that
transferred control of Techaatma to PFTC, Mr. Mr. Varma and TLB failed to meet this
obligation. The Loan Agreement effectively transferred control of Techaatma to PFTC, a
significant shift in corporate governance and ownership structure. This constitutes material
information that could impact investors’ perceptions and decisions regarding the
company's future. Such a significant change must be disclosed under Regulation 30 to
ensure transparency and maintain market integrity. The purpose of Regulation 30 is to
ensure that all relevant stakeholders, including investors, have access to material
information that might affect their investment decisions. The non-disclosure of the Loan
Agreement undermines this transparency, potentially misleading investors about the true
state of control and decision-making within Techaatma.
Regulation 3 and 4 of PFUTP Regulations, 2003 read with Sec 12A of SEBI Act, 1992.
27
Amendments to requirements for disclosure of material events or information by listed entities under SEBI
(Listing Obligations and Disclosure Requirements) Regulations, 2015 available at
https://www.sebi.gov.in/sebi_data/meetingfiles/apr-2023/1681703089597_1.pdf...
25
33. The PFUTP Regulations are designed to prevent practices that manipulate or distort the
market, including misleading investors. By not disclosing the Loan Agreement, Mr. Mr.
Varma and TLB engaged in an act that could be seen as deceptive, misleading the market
about the control and financial health of Techaatma. This lack of disclosure can be
construed as an attempt to conceal material information, thereby engaging in unfair trade
practices. The Loan Agreement's implications on control and potential changes in the
company's strategic direction were material facts that investors needed to know. Failure to
disclose such an agreement may lead investors to make decisions based on incomplete or
incorrect information, violating the principles of fair trading and transparency under the
PFUTP Regulations.
34. It is settled law, enunciated by the Hon’ble Supreme Court, that ‘concealment’ inherently
carries elements of mens rea, and that a finding relating to ‘concealment’ can only be
passed after appreciation of evidence gathered. In this regard, the reliance is placed on
matter of Pyramid Saimira Theatre Ltd v. SEBI28 in which the ratio led down by the
Hon’ble SC in Chairman, SEBI v. Shriram Mutual Fund29, that mens rea is not a sine
qua non30 for establishing violation of Chapter VIA of SEBI Act, was extended to all the
provisions of SEBI Act and the PFUTP Regulations. It was also observed that words
indicated in the definition of ‘fraud’ under Regulation 2(1)(c) of the PFUTP Regulations
“whether in a deceitful manner or not” are significant and clearly indicate that intention
to deceive is not an essential requirement of the definition of fraud. Further, Hon’ble
Bombay High Court in SEBI v. Skdc Consultants Ltd.31 And in SEBI v. Cabot
International Capital Corporation32 observed that as the imposition of the penalty under
the SEBI Act and regulations is civil in nature and cannot be equated with penal character,
mens rea is not essential for breaches of provisions of the SEBI Act and PFUTP
Regulations.
35. It is also relevant to mention that the definition of ‘fraud’ under Regulation 2(1)(c) of the
PFUTP Regulation is a civil fraud against criminal fraud and the prohibition under
Regulation 3 and 4 and consequent enforcement action under Chapter VIA of the SEBI
Act are also civil in nature. Thus, intention (mens rea) and proof beyond reasonable doubt
28
Pyramid Saimira Theatre Ltd v. SEBI, 2010 SCC Online SAT 146.
29
Chairman, SEBI v. Shriram Mutual Fund, (2006) 5 SCC 361.
30
an essential condition; a thing that is absolutely necessary.
31
SEBI V. Skdc Consultants Ltd., 2004 SCC Online BOM 1318.
32
SEBI V. Cabot International Capital Corporation, 2004 SCC OnLine Bom 180.
26
are not indispensable requirements and the correct test to establish the charge under
aforesaid provisions of SEBI Act and PFUTP Regulations is one of the preponderance of
probabilities.3334
36. Sec. 12A of the SEBI Act inter alia mandates that no person shall directly or indirectly
employ any device, scheme or artifice to defraud in connection with issue or dealing in
securities which are listed or proposed to be listed on a recognised stock exchange. Similar
prohibition is contained in Regulation 3(b) of PFUTP Regulations. Additionally,
Regulation 3(a) also prohibits buying, selling or dealing in securities in a fraudulent
manner. Regulation 4(1) of the PFUTP Regulation provides that no person shall indulge in
a fraudulent or an unfair trade practice in securities. Hence, such an arrangement and
scheme deployed by the Appellants to transfer their substantial stake in Techaatma to
PFTC was fraudulent in nature and was in violation of Sec. 12A (a) and (b) of SEBI Act,
1992 read with the Regulation 3(a),(b),(c) and (d) and 4(1) of the PFUTP Regulations.
37. In light of the extensive arguments and evidence presented, it is clear that the decision of
SEBI to impose penalties on Mr. Varma and TLB for their violations of disclosure
requirements is both justified and appropriate. The evidence demonstrates that PFTC's
acquisition of indirect control over Techaatma through the Loan Agreement necessitated
an open offer under the SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011, a requirement that was not fulfilled. The failure to disclose this material
information, as mandated by Regulation 30 of the LODR Regulations, 2015, and the
PFUTP Regulations, 2003, constitutes a clear breach of regulatory obligations.
38. The Appellants' non-disclosure of the Loan Agreement not only violated the transparency
requirements but also misled investors about the true nature of control and strategic
direction within Techaatma. This omission undermines market integrity and investor trust,
which are fundamental to the functioning of a fair and transparent securities market. Given
these breaches, SEBI’s decision to impose fines and take corrective action is well within
its regulatory authority and serves as a necessary measure to uphold market integrity and
investor protection. The fine imposed reflects the seriousness of the violations and the need
to deter similar conduct in the future. Therefore, the Appellants’ appeal should be
dismissed, and SEBI’s decision should be upheld in its entirety.
33
SEBI v. Kanaiyalal Baldev Bhai Patel, 2017 SCC OnLine SC 1148.
34
Supra note 24.
27
III. WHETHER MR. TAPAN MANOJ, TISHITA MEHTA AND TISHITA

39. The Counsel for the Respondents most humbly submits that Mr. Tapan Manoj (hereinafter,
“Mr. Manoj”), Ms. Tishita Mehta (hereinafter, “Ms. Tishita”) and Tishita Commodities
Private Limited (hereinafter, “Tishita Commodities”) have indulged in insider trading. It
is the Respondents contention that the Appellants are guilty of insider trading as There is
evidence of transmission and use of UPSI [A], It can be inferred from circumstantial
evidence that the noticees had access to UPSI [B] and further, The manipulative trades have
not been carried out in the due course of business [C].
[A] There is evidence of transmission and use of UPSI.
40. Conviction under the Insider Trading Regulations would therefore depend on proof of
fulfilment of two conditions: (i) the person is an ‘insider’; and (ii) such ‘insider’ had traded
in the relevant securities while in possession of UPSI.
The noticees are ‘insiders’.
41. The Patel Committee35 in 1986 defined insider trading as ‘trading in the shares of a
company by the person who is in the management of the company or is close to them on
the basis of undisclosed price sensitive information regarding the working of the company,
which they possess but which is not available to others’.
42. In KLG Capital Services Limited36, it was stated that a person would qualify to be an insider
if he is expected to have access to UPSI, or has received, or has had access to UPSI. It has
been held that, for the presumption of communication of UPSI to be raised, proving the
foundational fact of frequent communication through adequate material on record is a sine
qua non37 which is fulfilled. If a person has received UPSI, he/she will be an insider, no
matter if he is connected with the company or not38. This was in line with the 2015
regulations.
35
Report of the High-Powered Committee on Stock Exchange Reforms (G.S. Patel), SEBI, 1986
https://www.sebi.gov.in/sebi_data/attachdocs/1321419837830.pdff
36
Order In Matter of KLG Capital Services Limited, WTM/GM/EFD-DRA1/ISD/9769/2020-21,
https://www.sebi.gov.in/enforcement/orders/nov2019/order-in-the-matter-of-klg-capital-services-
limited_44874.html
37
Balram Garg v. SEBI, 9 SCC 425 (2022).
38
SEBI Order In the scrip of TATA Finance ltd, WTM/VKC/ ID5/ 119/08,
28
43. Mr. Manoj shall be deemed an insider as having been party to the said Loan Agreement.
Tishita Mehta shall be deemed to be a connected person due to proven frequent contact
between her and Mr. Manoj and Kapil Verma around the time of the loan agreement and
around the time of the alleged trades whilst also being the wife39 of Kapil Verma who was
the MD of Techaatma at the time of the agreement thus making her a connected person in
two different ways. Tishita Commodities shall be deemed to be a connected person due to
having Mr. Manoj who was privy to the loan agreement as its non-executive director whilst
holding 25% percent shares within it.
Such ‘insiders’ had traded in the relevant securities while in possession of UPSI.
44. Insider trading operates against the integrity of markets. It gives an unfair advantage to
people who have access to such information allowing them to make an unfair profit or avoid
a loss by acting on such information40.
45. Regulation 4(2) of Insider Trading Regulations, 2015, categorically states that in the case
of connected persons the onus of establishing, that they were not in possession of UPSI,
shall be on such connected persons41 because if an insider who is a connected person with
the company, trades in the securities of that company when there was UPSI, then it gives
rise to a reasonable inference that such person has traded when in possession of UPSI42. As
there is enough evidence on record to reasonably prove that UPSI was transmitted and put
to use by the noticees, it is upon the noticees to establish how they were not in fact, in
possession of UPSI.
46. If an insider trades or deals in securities of a listed company, the law presumes that he has
traded on the basis of the UPSI, unless the contrary is proved. This was held in Rajiv B
Gandhi vs SEBI43 and reiterated in the matter of Reliance Petro Investments Limited vs
SEBI44as well. It has also been held in the matter of Samir C Arora vs SEBI45, SAT observed
39
Settlement Order in Matter of Manappuram Finance Ltd, Order/VV/JR/2020-21/8229,
https://www.sebi.gov.in/enforcement/orders/jul-2020/settlement-order-in-respect-of-manappuram-financeltd-in-
the-matter-of-manappuram-finance-limited_47024.html
40
Research Report on, A Review Of Indian Insider Trading Cases, Moneylife Foundation available at
https://www.mlfoundation.in/media/uploads/article/pdf/1667978689685.pdf
41
Supra note 2.
42
Final Order in the matter of Divis Laboratories Ltd. in respect of Mr. Srinivas Maddineni,
WTM/AB/IVD/ID3/9771/2020-21, https://www.sebi.gov.in/enforcement/orders/dec-2020/final-order-in-
thematter-of-divis-laboratories-ltd-in-respect-of-mr-srinivas-maddineni-_48408.html
43
Supra note 2.
44
SEBI Order In the matter of Reliance Petro Investments Limited, ORDER NO. AO/SG-AS/EAD/15/2016
45
Samir C. Arora v. SEBI, [2005] 59 SCL 96 (SAT).
29
that in offences relating to the securities market, it is not necessary for the regulator to prove
the case beyond reasonable doubt.
47. “Section 15G (i) mentions dealing in securities on the basis of unpublished price sensitive
information whereas Section 12 A mentions dealing in securities while in possession of
unpublished price sensitive information. It is proved due to the evidence of CDR that
Tishita Manoj was in fact in possession of said insider information. Further, as SEBI has
relatively restricted fact-finding powers in comparison to the securities regulators in certain
other jurisdictions, circumstantial evidence may be relied upon to prove that the noticees
were not only in possession of UPSI but also traded on the basis of it.
48. In the year 2019, when the manipulative trades occurred, the information regarding the loan
agreement was still considered UPSI which the general public did not have access to. The
noticees at that point still maintain an unfair advantage allowing them to make unfair profits
as compared to the rest of the market. The appellants have used information that was not
public, and price sensitive to make unfair profits.
49. It has been established that in the present case, there has been the misuse of fiduciary
position and the transaction was undertaken to make an unfair gain or profit. It is a further
contention of the respondents that the transmission of the UPSI to connected persons and
its subsequent use by said connected persons to make unfair gains coupled with the
circumstantial evidence present and the principle of preponderance of probabilities weighs
towards the appellants guilt more than it does towards their innocence.
[B] It can be inferred from circumstantial evidence that the noticees had access to UPSI
50. The N.K. Sodhi Committee Report46 observed that it was simply not possible to obtain
direct evidence in all insider trading cases, and the “facts and circumstances” of the case
have to be assessed to determine if a person can reasonably be inferred to have access to
UPSI.
51. Circumstantial evidence can be sufficient to establish the existence of insider trading if it
leads to an “irresistible inference” that sensitive information was provided by the tippers to
tippees47.Similarly, SEBI v. Rakhi Trading (P) Ltd.48 also established that the commission
46
Report Of The High-Level Committee To Review The SEBI (Prohibition Of Insider Trading) Regulations,
1992 (N.K. Sodhi), SEBI (December 7, 2013).
47
Supra note 21.
48
Supra note 24.
30
of the violations can be proved by relying on circumstantial evidence if direct evidence

does not exist.
52. In the case of CRISIL Ltd49, selling of shares by the accused during the “UPSI period”,
along with a general interrelation between the various accused was considered to be
sufficient circumstantial evidence to establish the existence of insider trading. Actual proof
of any communication was not available here. In the present case, all of the factors used to
establish insider trading exist but are also made stronger by the evidence of CDR between
the parties proving frequent communication.
53. Similarly, in Kunal Ashok Kashyap50, and in Biocon Ltd51, SEBI demonstrated that any
person who is even remotely connected to the alleged offender can be presumed to have
the ability to access UPSI. Thus, SEBI put presumptions on a higher pedestal. Direct
evidence in insider trading cases is hard to come by52. Such evidence is usually in the
knowledge of the alleged offenders. In the absence of adequate evidence, a case of insider
trading cannot be made out.53 In Atlanta Ltd54, it was noted that in absence of direct
evidence, a “prudent man’s” assessment of the probabilities of the circumstances of the
case would be imperative.
[C] Mens rea is not an essential factor for penalization.
54. The SC in SEBI vs Shriram Mutual Fund55 and the legislative notes to Regulation 4 clarified
that mens rea cannot be deemed an essential factor for penalisation under the Insider
Trading Regulations. In the Cabot International Capital Corporation case56, the Bombay
High Court observed that the penalty scheme specified under the SEBI Act and the SEBI
regulations is a penalty for failure of a statutory obligation or breach of a civil commitment,
and does not entail the element of mens rea as it is not an essential criterion for imposing
penalties because there is no element of any criminal act as conceived under criminal
proceedings.
49
SEBI order In the scrip of CRISIL Ltd, 2019 SCC OnLine SEBI 402.
50
SEBI Order In Matter of Kunal Ashok Kashyap, 2021 SCC OnLine SEBI 175.
51
SEBI Order In Matter of Biocon Ltd, 2021 SCC OnLine SEBI 1082.
52
“Insider Trading: Circumstantial Evidence is Evidence Enough?” available at
https://repository.nls.ac.in/cgi/viewcontent.cgi?article=1083&context=nlsir
53
SEBI finds it difficult to crack down on insider trading, October 21, 2009
https://economictimes.indiatimes.com/sebi-finds-it-difficult-to-crack-down-on-insider-
trading/articleshow/5143683.cms?from=mdr
54
SEBI Order In Matter of Atlanta Ltd, 2007 SCC OnLine SEBI 236.
55
Supra note 29.
56
SEBI v. Cabot International Capital Corporation, 2004 SCC OnLine Bom 180.
31
55. The views expressed by the SAT in the Rakesh Agarwal case57about mens rea being
required for imposition of punishment have been impliedly overruled in light of the
aforementioned SC and SAT rulings. The existing statutes make it clear that motive isn't
important, and insider trading is punished even if mens rea is not proven.
56. However, it must be noted that the actions of the noticees point to the existence of mens rea
regardless. The transmission of UPSI is established, the manipulative trades being carried
out at a time when the UPSI was yet not publically disclosed combined with the trades so
carried out being to the benefit of the noticees, especially Mr. Tapan on behalf of PFTC, all
point to the existence of a clear motive.
57
Rakesh Agarwal v. SEBI, (2004) 49 SCL 351 (SAT).
32
IV. WHETHER THE APPELLANTS HAVE INDULGED IN PRICE MANIPULATION

57. The Respondents submit that the Appellants have indulged in price manipulation as the
increase in price is well-planned and orchestrated, [A] as collusion among the
implicated parties has occurred [B] and as the manipulative trades have not been carried
out in the due course of business. [C] Further, it is also submitted that Mr Tapan has
failed to disclose his conflict of interest [D].
[A] The increase in price is well-planned and orchestrated
58. “Market manipulation is normally regarded as the ‘unwarranted’ interference in the

operation of ordinary market forces of supply and demand and thus undermines the
‘integrity’ and efficiency of the market as defined in Palmer’s Company Law and noted by
the SC58. It is a deliberate attempt to interfere with the free and fair operation of the market
and create false or misleading appearances with respect to the price, market, product,
security and currency. 59
59. A healthy market moves according to supply and demand which vary based on external
circumstances. However, in the present case, Mr. Tapan, being the orchestrator of the
scheme, has himself, at two different instances, been a key reason for the rise in trading
activity and then eventually the price of the scrip.
60. Particularly of note is the drop in price post the merger announcement and Mr Tapans
immediate reaction, publishing praises of Techaatma’s strategies and its potential. Mr
Tapan’s tactics were one of two reasons that led the scrip price to record an all-time high.
Mr Tapan has, by unfairly commenting upon the scrip of a company he has an interest in
and by fraudulently inducing the market to move to his benefit has disturbed fair market
forces.
61. It is further submitted that through Tishita Commodities, a brokerage Mr Tapan has 25%
stake in, he has, using the means of collusion conducted a series of manipulative trades
above LTP in the market that have eventually led to an increase in the price of the scrip.
According to the analysis of trades relied upon, Tishita Commodities and the implicated
connected entities have collaboratively contributed to a 62.83% rise in the market LTP. The
connections between the implicated entities are further elaborated in the SCN and
connections have been made between Tishita Commodities and all implicated entities.
58
N. Narayanan v. Adjudicating Officer (SEBI), (2013) 12 SCC 152.
59
Supra note 24.
33
[B] Collusion has occurred among the implicated parties
62. Firstly, Mr. Manoj is a 25% shareholder of Tishita Commodities and is the head of the
‘other investments’ department in the company, which was in charge of proprietary
stock/commodities investments. He further possesses the luxury of exercising indirect
control over Techaatma, owned by Mr. Kapil Verma, due to the LAS Loan Agreement.
63. The entities which have acted in furtherance of artificially raising the price possess common
connections, including without limitation, common directors, familial relations, financial
liabilities, social media, etc.
64. Secondly, the order book in Annexure B clearly signifies their intention due to the existence
of perfect buying and selling orders from the colluding parties which are intentionally low
volume in order to merely fulfil the purpose which is to increase the scrip price of
Techaatma by fraudulently trading above LTP.
65. Moreover, the timings of the sale and subsequent purchase are separated by mere minutes
and possess the exact specific quantity of Shares as well as the number of Orders. Almost
as if they knew what they precisely the exact price Tishita Commodities was trading at and
at what quantity in each price range. It must also be noted that the implicated entities have
performed trades in this specific manner multiple times.
[C] The manipulative trades have not been carried out in the due course of business.
66.SEBI is not required to prove that the intention of the person was to commit the fraud.
However, it has even been expressly stated in SEBI v. Kanaiyalal Baldev Patel60 that,
“mens rea is not an indispensable requirement to attract the rigour of Regulations 3 and
4, and the correct test is one of preponderance of probabilities.”
67. The manner and precision of the execution of the trades, the profit to be gained by Mr.
Tapan upon the increase in the price of the scrip of Techaatma, and the connections
established among the implicated entities all point to the guilt of the noticees more than
they do to their innocence.
68. It is submitted that the impugned trades have not occurred due to external
circumstances warranting the defence of ‘due course of business’ but has rather occurred
due to the noticees acting in a collusive manner to artificially manipulate the price of the
scrip of Techaatma so Mr. Manoj may benefit off of it on the behalf of PFTC.
60
SEBI v. Kanaiyalal Baldev Patel (2017) 15 SCC 1.
34
[D] Mr Tapan has failed to disclose his conflict of interest.
69. It is our contention that whilst being in a position to exercise indirect control over
Techaatma as party to the LAS, Mr Tapan has a conflict of interest that he isn’t disclosing
to the public whilst he provides the public with positive information about Techaatma that
is biased whilst he detracts his competitors. Even the mere possibility of it being biased is
something that warrants a disclosure to ensure that public isn’t unknowingly operating on
Mr. Tapan’s behalf for his gain.
70. In the case of Sadhna Broadcast Ltd., 202361 SEBI found that promoters and influencers
were promoting Sadhna Broadcast Ltd. through misleading information on social media
while holding stakes in the company. They did not disclose this interest to the public, and
SEBI took action against them for manipulating stock prices.
71. In SEBI v. Kanaiyalal Baldev Patel62 the Court held that, “The definition of “fraud”, which
is an inclusive definition and, therefore, has to be understood to be broad and expansive,
contemplates even an action or omission, as may be committed, even without any deceit if
such act or omission has the effect of inducing another person to deal in securities. Mr.
Tapan by omitting to mention his conflict of interests in the provision of such information
had fraudulently acted for his unfair benefit.
61
SEBI Order in the matter of Stock Recommendations using YouTube in the scrip of Sadhna Broadcast
Limited, WTM/AN/ISD-SEC-1/29722/2023-24, https://www.sebi.gov.in/enforcement/orders/oct-
2023/confirmatory-order-in-the-matter-of-stock-recommendations-using-youtube-in-the-scrip-of-sadhna-
broadcast-limited_78612.html
62
Supra note 23.
35
PRAYER
Wherefore, in the light of the facts stated, issues raised, arguments advanced, and authorities
cited, it is most humbly prayed by the Respondent before the Hon’ble Securities Appellate
Tribunal to adjudge and declare that:
A. Mr. Kapil Varma and The Local Brain have indulged in insider trading;
B. The Appellants have violated disclosure requirements;
C. The Appellants were obligated to make an open offer;
D. Mr. Tapan Manoj, Ms. Tishita Mehta and Tishita Commodities have indulged in insider
trading;
E. Mr. Tapan Manoj and Tishita Commodities have indulged in price manipulation;
F. Dismiss the appeals of Appellants;
G. Grant any other order in favor of Respondent that the Tribunal may deem fit in the eyes of
equity, justice and good conscience.
And for this act of kindness, the Respondent shall be duty bound and forever pray.
All of which is humbly prayed.
Sd./-
Counsels for the Respondent
Place: Mumbai, Maharashtra
Date:
36

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WRITTEN SUBMISSION for THE RESPONDENTS

TEAM CODE - 112

8th GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2024

BEFORE THE SECURITIES APPELLATE TRIBUNAL

CASE NO. ___/ 2023

APPEAL NO. __/2023

MR. KAPIL VARMA & ANR ….APPELLANTS

APPEAL NO. __/2023

PFTC & ORS. …. APPELLANTS

APPEAL NO. __/2023

MR. TAPAN MANOJ & ANR ….APPELLANTS

WRITTEN SUBMISSION for THE RESPONDENT

TABLE OF CONTENTS ......................................................................................................... 2

LIST OF ABBREVIATIONS .................................................................................................. 4

INDEX OF AUTHORITIES ................................................................................................... 6

STATEMENT OF FACTS ..................................................................................................... 10

SUMMARY OF ARGUMENTS ........................................................................................... 14

ARGUMENTS ADVANCED ................................................................................................ 16

[A] Varma and TLB are “insiders” ................................................................................... 16

II. WHETHER APPELLANTS HAVE VIOLATED ANY DISCLOSURE

[A] PFTC HAS ACQUIRED INDIRECT CONTROL OVER TECHAATMA DUE TO

III. WHETHER MR. TAPAN MANOJ, TISHITA MEHTA AND TISHITA

[A] there is evidence of transmission and use of UPSI. ................................................... 28

[C] Mens rea is not an essential factor for penalization. .................................................. 31

VI. WHETHER THE APPELLANTS HAVE INDULGED IN PRICE MANIPULATION 33

[A] The increase in price is well-planned and orchestrated ............................................. 33

[B] Collusion has occurred among the implicated parties ................................................ 34

[D] Mr Tapan has failed to disclose his conflict of interest. ............................................. 35

PRAYER ..................................................................................... Error! Bookmark not defined.

Sr. No. Abbreviations Full Form

30. Para Paragraph

ALAN R. BROMBERG AND LEWIS D. LOWENFELS, BROMBERG & LOWENFELS

JAMES ROBERT BROW, THE REGULATION OF CORPORATE DISCLOSURE 5.01 (3rd

N.S. BINDRA, N.S. BINDRA’S INTERPRETATION OF STATUTUES, 775(10th ed., Lexis

PETER MAXWELL, BRIAN GALPIN AND ROY WILSON, INTERPRETATION OF

Balram Garg v. SEBI, 9 SCC 425 (2022) ……………………………………………………28

Chairman, SEBI v. Shriram Mutual Fund, (2006) 5 SCC 361 ………………………………26

Mahadevan v. M.D., T.N. Housing Board, (2005) 6 SCC 636 ………………………………21

N. Narayan v. Adjudicating Officer (SEBI), (2013) 12 SCC 152 ………………………… 33

SEBI v. Kanaiyalal Baldev Bhai Patel (2018) 13 SCC 753 …………………………………35

SEBI v. Kishore R Ajmera, 5 (2016) 6 SCC 368 ………………………………………....... 23

SEBI v. Rakhi Trading Private Ltd. (2018) 13 SCC 753 ………………………………… 24

State of Andhra Pradesh v. N. Radhakrishnan, (1998) 4 SCC 154 ………………….………21

3 P RAMANATHA AIYAR,THE MAJOR LAW LEXICON (4th ed., Lexis Nexis,

Other Authorities / Internet Documents

“Insider Trading: Circumstantial Evidence is Evidence Enough?” available at

Amendments to requirements for disclosure of material events or information by listed

SEBI Reports/ Circulars

DSQ Holdings Limited v. SEBI, [2005]60SCL156(SAT) ……………………………… …16

HB Stockholdings Ltd. v. SEBI, 2013 SCC Online SAT 56 ………………………..……… 21

Hindustan Lever Ltd v. SEBI, (1998) 18 SCL 311 MOF ……………………………………17

Libord Finance Ltd. v. SEBI, 2008 SCC Online SAT 46 ……………………………………21

Rajiv Gandhi v. SEBI, 2008 SCC OnLine SAT 78 ………...……………………………… 16

Rakesh Agarwal v. SEBI, (2004) 49 SCL 351 (SAT) ……………………………………….32

Samir C. Arora v. SEBI, [2005] 59 SCL 96 (SAT) ………………………………………… 29

Unpublished SAT Orders

Order In Matter of KLG Capital Services Limited, WTM/GM/EFD-DRA1/ISD/9769/2020-

Order in Matter of Zylog Systems Limited & Ors, WTM/PS/50/ISD/JUL/2015, available at

Settlement Order in Matter of Manappuram Finance Ltd, Order/VV/JR/2020-21/8229,