Redefining Corporate Accountability And Insider Trading Liability In India: The Supreme Court's Jurisprudential Shift In Sanofi India And Rajeev Vasant Sheth

An Examination of Corporate Attribution, Possession-Based Insider Trading, Evidentiary Presumptions and the Evolving Enforcement Framework under Indian Securities Law

1. INTRODUCTION

The jurisprudence surrounding corporate criminal liability and insider trading in India has undergone considerable doctrinal refinement, particularly in relation to the attribution of knowledge, the evidentiary threshold for establishing regulatory contraventions and the relevance of commercial intention in determining liability. The increasing complexity of corporate structures, the proliferation of sophisticated securities transactions and the expansion of regulatory oversight have compelled courts to reconsider the traditional principles governing responsibility for acts undertaken through corporate entities. At the centre of this development lie two fundamental questions: first, under what circumstances may the conduct and mental state of a natural person be attributed to a corporation; and secondly, whether a person dealing in securities while possessing unpublished price sensitive information may escape regulatory liability by demonstrating the absence of wrongful intention, personal enrichment or actual trading profit.

The Supreme Court of India has recently addressed these questions in two significant judgments, namely, Sanofi India Ltd. v. Central Bureau of Investigation, 2026 INSC 957, decided on 7 September 2026 ("Sanofi"), and Securities and Exchange Board of India v. Rajeev Vasant Sheth & Ors., 2026 INSC 826, decided on 11 August 2026 ("Rajeev Vasant Sheth"). Although rendered in different statutory and factual contexts, these decisions collectively contribute to a more structured understanding of corporate and securities-market accountability. In Sanofi, the Supreme Court formulated a hierarchical framework governing attribution of criminal conduct and mens rea to corporate entities, while holding that the absence of an identified or separately arraigned natural person does not, by itself, render criminal proceedings against a company unsustainable. In Rajeev Vasant Sheth, the Court reaffirmed the possession-based prohibition embodied in Regulation 4(1) of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, and held that the commercial purpose underlying a trade, the utilisation of its proceeds and the absence of realised profit cannot ordinarily displace the statutory prohibition once its foundational requirements are established.[1][2]

These pronouncements acquire particular significance when examined against the earlier line of Supreme Court decisions, including Chintalapati Srinivasa Raju v. Securities and Exchange Board of India, (2018) 7 SCC 443; Balram Garg v. Securities and Exchange Board of India, (2022) 9 SCC 425; and Securities and Exchange Board of India v. Abhijit Rajan, (2024) 11 SCC 645. While these authorities emphasised the necessity of establishing access to unpublished information, proving the alleged communication of such information and, under the earlier regulatory regime, examining the commercial circumstances in which particular transactions occurred, Rajeev Vasant Sheth has clarified the limits within which those principles may operate under the subsequent regulatory framework. Equally, Sanofi develops the principles previously considered in Standard Chartered Bank v. Directorate of Enforcement, (2005) 4 SCC 530, and Iridium India Telecom Ltd. v. Motorola Inc., (2011) 1 SCC 74, by supplying a more comprehensive framework for determining how a corporation may possess a legally attributable guilty mind.[3]

These developments should not be understood as establishing an unrestricted presumption of wrongdoing against corporate entities or persons associated with listed companies. Rather, they underscore the need to distinguish between the establishment of foundational facts and the legal consequences flowing from those facts, the statutory elements of a regulatory contravention and those of a criminal offence, and the attribution of knowledge to a corporation as opposed to the independent criminal responsibility of individuals acting for it. This article examines these distinctions through the statutory architecture governing insider trading, the evolution of the relevant judicial precedents, the doctrinal reasoning underlying the two recent judgments and their implications for listed companies, promoters, directors, institutional investors and other securities-market participants.

2. THE STATUTORY FRAMEWORK: FROM INFORMATIONAL ASYMMETRY TO POSSESSION-BASED LIABILITY

The prohibition of insider trading constitutes an integral component of the investor-protection framework established under the Securities and Exchange Board of India Act, 1992 (the "SEBI Act"). The regulatory object is to prevent persons occupying an informationally advantageous position from dealing in securities in circumstances inconsistent with fair and transparent market participation. In its broadest commercial sense, insider trading refers to transactions in securities undertaken by persons possessing confidential information concerning an issuer or its securities that is unavailable to the investing public and capable of materially affecting the securities' market price. The regulatory prohibition, however, must be distinguished from the general commercial understanding of the expression. Not every person possessing confidential corporate information commits insider trading, nor does every trade executed by a director, promoter or other connected person necessarily constitute a contravention. Liability is determined by reference to the definitions, prohibitions, presumptions and permissible circumstances prescribed by the applicable legislation.

Section 11 of the SEBI Act confers upon the Securities and Exchange Board of India ("SEBI") the statutory responsibility to protect the interests of investors and regulate the securities market, while Section 11(2)(g) expressly recognises the prohibition of insider trading as an aspect of that responsibility. Section 12A(d) prohibits engaging in insider trading, and Section 12A(e) prohibits dealing in securities while in possession of material or non-public information, or communicating such information, in a manner contrary to the Act or the regulations made thereunder. Section 15G provides for monetary penalties in respect of specified insider-trading contraventions, whereas Section 15J prescribes factors relevant to the determination of the quantum of penalty. The regulatory framework is supplemented by SEBI's powers under Sections 11 and 11B, including the authority to issue appropriate directions in the interests of investors and the securities market and, in circumstances contemplated by the statute, direct disgorgement of wrongful gains or losses avoided. The interplay between these provisions is important because the legal test for establishing a contravention, the availability of statutory defences, the determination of monetary penalties and the exercise of remedial powers constitute related but analytically distinct inquiries.

The operative regulatory regime is contained in the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (the "PIT Regulations"), which replaced the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 (the "1992 Regulations"). Regulation 2(1)(n) defines "unpublished price sensitive information" ("UPSI") as information relating, directly or indirectly, to a company or its securities which is not generally available and which, upon becoming generally available, is likely to materially affect the price of the securities. The definition proceeds on a principle of likely material price impact rather than requiring proof of a particular realised movement in market price. Consequently, adverse financial information, corporate defaults, financial restructuring proposals and other developments capable of diminishing securities value may constitute UPSI as readily as information concerning profitable acquisitions, favourable earnings or business expansion. Equally, the mere existence of confidential information does not automatically render it UPSI; the statutory requirements concerning general availability and likely material price sensitivity remain indispensable.

The definition of "insider" under Regulation 2(1)(g) encompasses a person who is either a "connected person" or is in possession of, or has access to, UPSI. These are alternative statutory routes through which insider status may arise. Regulation 2(1)(d) addresses persons associated with a company, directly or indirectly, in circumstances allowing or reasonably expected to allow access to UPSI. The definition has undergone further expansion through the amendments notified in December 2024, including changes concerning relatives and other categories of deemed connected persons. The significance of these amendments lies in the legislative recognition that informational access may arise through personal, professional, contractual and organisational relationships extending beyond the company's formal managerial hierarchy. However, the relevant version of the definition must always be identified by reference to the date of the alleged contravention, and the applicable deeming provisions and rebuttal mechanisms must be given their proper statutory effect. A historical connection, familial relationship or professional association should not be treated as a substitute for the analysis required by the particular limb of the definition invoked.[4]

The contemporary regulatory framework has also expanded the categories of matters ordinarily constituting UPSI. The amendments notified in March 2025, which became operative in June 2025, broadened the illustrative matters covered by Regulation 2(1)(n), including several developments relevant to corporate financing, restructuring, enforcement and financial distress. Information concerning specified fundraising proposals, material defaults, loan restructuring, insolvency-related proceedings, forensic audits and significant regulatory developments may therefore require consideration within the company's UPSI-identification framework. This expansion is particularly relevant for listed companies experiencing financial stress or undergoing corporate restructuring, where information concerning lender negotiations, creditor enforcement, insolvency proceedings or regulatory action may be commercially sensitive well before the company is able to announce a final resolution. Nevertheless, inclusion of additional illustrative categories does not dispense with the need to apply the operative requirements of the definition or justify retrospective application of subsequently introduced regulatory categories to transactions governed by earlier law.[4]

The essential change introduced by the PIT Regulations is the express prohibition under Regulation 4(1) against trading while in possession of UPSI, subject to the circumstances contemplated by the proviso to that regulation. Regulation 3 separately regulates communication, provision, procurement and access to UPSI, subject to specified permissible purposes. The distinction between these provisions is fundamental. An allegation that one person communicated UPSI to another requires examination of the communication-related prohibition and the evidence supporting the alleged transfer. An allegation that an insider traded while possessing UPSI requires consideration of the possession-based trading prohibition. Although both provisions are connected by the concept of UPSI, they do not create identical factual requirements or presumptions. The failure to maintain this distinction has been a recurring source of controversy in enforcement proceedings and was addressed by the Supreme Court in Balram Garg before receiving further clarification in Rajeev Vasant Sheth.

3. JUDICIAL DEVELOPMENT OF INSIDER TRADING LIABILITY BEFORE 2026

The first important strand of insider-trading jurisprudence concerns the necessity of establishing the relationship between the alleged insider and the UPSI. In Chintalapati Srinivasa Raju v. Securities and Exchange Board of India, (2018) 7 SCC 443, the Supreme Court examined proceedings arising from the financial irregularities involving Satyam Computer Services Limited. The relevant allegations included claims that persons previously associated with the company had traded while possessing unpublished information concerning the falsification of its financial statements. The Court considered the statutory definition of insider under the 1992 Regulations, particularly the requirement that a connected person be reasonably expected to have access to UPSI. In rejecting an approach founded principally upon formal designation and familial association, the Court emphasised the necessity of identifying relevant foundational circumstances supporting the inference of access. The fact that a person had previously served as an executive or non-executive director did not, without examination of the applicable facts and statutory language, conclusively establish that such person was privy to subsequent fraudulent financial conduct. The judgment thus stands for the broader evidentiary proposition that the regulator must establish the relevant statutory connection through material capable of sustaining a legitimate inference, rather than proceeding from the assumption that a person's corporate status necessarily establishes knowledge of every confidential corporate development.[5]

This principle was developed further in Balram Garg v. Securities and Exchange Board of India, (2022) 9 SCC 425, which arose from proceedings concerning trading in the securities of PC Jeweller Limited. SEBI alleged that UPSI relating to a proposed buyback and its withdrawal had been communicated by members of the company's senior management to other persons connected through familial relationships. The regulatory conclusion rested substantially upon the nature of those relationships, certain historical financial and personal associations and the timing and pattern of the impugned trades. The Supreme Court, however, distinguished the prohibition against communication of UPSI under Regulation 3 from the presumptions relevant to trading while in possession of UPSI under Regulation 4. The Court declined to infer communication merely from familial proximity, alleged residential association and trading behaviour, where the record did not furnish sufficient material to establish the alleged information flow. Significantly, the judgment did not prescribe direct documentary evidence as an indispensable requirement in every insider-trading case. It required that any inferential conclusion be supported by legally sufficient foundational facts. The distinction is important because allegations of insider trading frequently arise in circumstances where direct evidence of information-sharing may be unavailable; however, the inherent difficulty of obtaining direct evidence does not authorise the substitution of speculation for proof.[6]

The evidentiary approach in Balram Garg must also be considered alongside Securities and Exchange Board of India v. Kishore R. Ajmera, (2016) 6 SCC 368. Although Kishore R. Ajmera arose in the context of alleged manipulative trading rather than the possession-based prohibition under the PIT Regulations, the Supreme Court recognised that proceedings concerning civil liability under securities-market legislation are generally assessed by applying the standard of preponderance of probabilities. Direct evidence of a meeting of minds or coordinated misconduct may not invariably be available, and legally sustainable conclusions may therefore be drawn from established circumstances and the totality of the evidence. The relevance of Kishore R. Ajmera to insider-trading proceedings lies in its treatment of circumstantial evidence, not in any proposition that every unusual trade or personal association establishes possession of UPSI. Read together, Kishore R. Ajmera and Balram Garg indicate that circumstantial evidence is admissible and may be sufficient, but its probative value must be examined in relation to the specific statutory allegation and the reliability of the factual inferences sought to be drawn.[7]

A separate and particularly significant strand of the jurisprudence concerns the relevance of the purpose underlying a transaction. In Rakesh Agrawal v. Securities and Exchange Board of India, 2003 SCC OnLine SAT 38, the Securities Appellate Tribunal considered insider-trading allegations under the earlier regulatory framework and attached considerable importance to whether the transactions were undertaken for a legitimate corporate purpose and whether the alleged insider intended to secure an improper advantage. The decision was frequently invoked in support of the proposition that a transaction undertaken bona fide for the benefit of the company, without personal enrichment or misuse of information, should not necessarily attract insider-trading liability. However, the decision was rendered by the Tribunal under the 1992 regulatory framework. Its reasoning therefore required subsequent examination in light of the express language and structural differences introduced by the PIT Regulations, particularly the regulatory note accompanying Regulation 4(1).[8]

The Supreme Court's decision in Securities and Exchange Board of India v. Abhijit Rajan, (2024) 11 SCC 645, decided on 19 September 2022, further contributed to this debate. The proceedings concerned the sale of shares in Gammon Infrastructure Projects Limited in circumstances involving the termination of certain commercial agreements and a corporate debt restructuring arrangement. The sale was undertaken notwithstanding the existence of information which, upon becoming generally available, was expected to favourably affect the securities' value. The Supreme Court examined the commercial necessity underlying the transaction, including the need to meet commitments associated with the restructuring process and the potentially severe financial consequences of its failure. On the facts and under the applicable 1992 Regulations, the Court declined to sustain the insider-trading allegation. The decision attached importance to the economic circumstances of the transaction and the absence of a commercially rational incentive to sell shares before the public disclosure of favourable information merely to exploit that information. It is, however, essential to recognise that the Court's reasoning was situated within the regulatory provisions applicable to transactions undertaken in 2013, rather than the subsequently introduced possession-based formulation under Regulation 4(1) of the PIT Regulations.[9]

These decisions collectively reflect two distinct concerns within insider-trading jurisprudence. The first relates to the sufficiency of evidence establishing the alleged insider's access to or possession of UPSI. The second relates to whether legitimate commercial considerations, financial necessity or the absence of improper motive can displace liability after possession and trading are established. The former concern continues to engage the evidentiary principles developed in Chintalapati Srinivasa Raju, Balram Garg and Kishore R. Ajmera. The latter has been materially clarified by Rajeev Vasant Sheth, which directly examines the legal effect of the prohibition and explanatory note contained in Regulation 4(1) of the PIT Regulations.

4. RAJEEV VASANT SHETH: THE SUPREME COURT'S REAFFIRMATION OF POSSESSION-BASED INSIDER TRADING LIABILITY

The controversy in Rajeev Vasant Sheth arose from transactions in the shares of Tara Jewels Limited ("Tara Jewels"), a listed company that had experienced a substantial deterioration in financial performance. Mr. Rajeev Vasant Sheth was the Chairman and Managing Director of Tara Jewels, while Ms. Aarti Sheth and Ms. Divya Sheth were promoters and Vice Presidents. The company reported losses of approximately INR 166.80 crore for the quarter ended September 2017, as compared with approximately INR 6.62 crore in the preceding quarter, accompanied by a decline of approximately 69% in net sales. SEBI identified the period commencing on 2 October 2017 and ending on 29 November 2017 as the relevant UPSI period. During that period, Mr. Sheth sold approximately 30.94 lakh shares, representing approximately 12.56% of the company's shareholding, followed by further transactions involving approximately 29.75 lakh shares. His daughters also disposed of their respective shareholdings. SEBI alleged that these transactions had been executed while the respondents possessed adverse unpublished financial information and had enabled avoidance of losses aggregating approximately INR 1.38 crore.[1]

By an order dated 24 May 2021, SEBI's Whole Time Member concluded that the respondents had contravened the relevant provisions of the SEBI Act and the PIT Regulations. The order imposed monetary penalties under Section 15G, directed disgorgement of losses avoided together with interest and imposed restrictions upon the respondents' access to the securities market. The Securities Appellate Tribunal, by its order dated 19 April 2022, set aside the findings, accepting the respondents' explanation that the transactions had been undertaken in circumstances involving financial distress and a risk of the company being classified as a non-performing asset. The Tribunal also considered the relatively limited movement in the securities' market price immediately following public disclosure of the relevant information and concluded that the circumstances did not justify treating the sales as transactions undertaken for the purpose of avoiding losses. SEBI challenged the Tribunal's decision before the Supreme Court under Section 15Z of the SEBI Act.

The central question before the Supreme Court was whether the existence of a legitimate commercial explanation, coupled with the alleged absence of substantial profit or adverse price movement, could defeat the prohibition contained in Regulation 4(1). The Court commenced its analysis by examining the structure of the PIT Regulations and the distinction between the definitions of connected person, insider and UPSI. It then considered the circumstances expressly contemplated by the proviso to Regulation 4(1), including specified transactions between insiders possessing the same UPSI, qualifying block-deal transactions, transactions undertaken pursuant to statutory or regulatory obligations, prescribed stock-option exercises, the arrangements applicable to non-individual insiders and transactions pursuant to compliant trading plans. The Court regarded the accompanying regulatory note as significant in determining the legal consequences of a trade undertaken while possessing UPSI.

The note appended to Regulation 4(1) proceeds on the premise that a person who trades while possessing UPSI is presumed to have been motivated by the knowledge and awareness of that information. It further indicates that the reasons underlying the trade or the purposes for which the proceeds are applied are not intended to determine whether the prohibition has been contravened. The distinction between the presumption and the facts required to activate it is fundamental. The note does not permit the regulator to presume the existence of UPSI or its possession by an alleged insider without first establishing the relevant foundational requirements. Rather, it addresses the legal consequences flowing from the establishment of those requirements and places the burden upon the alleged insider to demonstrate circumstances capable of exonerating the trade under the regulation. Accordingly, the statutory prohibition cannot be interpreted as requiring SEBI to establish, in every case, that the person traded specifically with an intention to exploit the information for financial gain.

In paragraph 11 of the judgment, the Supreme Court placed particular emphasis upon the fact that possession of UPSI and the execution of substantial sales during the UPSI period were not disputed. Having regard to those circumstances, the Court held that the application of the sale proceeds was irrelevant to the determination of the contravention and that the absence of substantial profit did not alter the legal consequence of trading while possessing UPSI. This reasoning marks an important departure from any approach treating insider trading solely as an offence of demonstrated personal enrichment. The regulatory prohibition addresses the impermissible act of trading while possessing the relevant information, subject to legally recognised exonerating circumstances. The ultimate profitability of the trade and the question whether the securities experienced an immediate market-price adjustment are therefore not universal constituent elements of the contravention. The position does not eliminate the relevance of price information for all purposes; it remains potentially relevant to assessing materiality, quantifying wrongful gains or losses avoided and determining appropriate regulatory consequences.

One of the most consequential aspects of the judgment is the Supreme Court's treatment of Abhijit Rajan. The respondents had relied upon that decision to contend that the impugned sales should not attract liability because they were undertaken for legitimate financial purposes. The Court, however, distinguished Abhijit Rajan on the basis that the relevant transactions were governed by the 1992 Regulations, which did not contain the explanatory note subsequently incorporated into Regulation 4(1) of the PIT Regulations. The Supreme Court expressly acknowledged that the earlier framework had permitted consideration of the commercial purposes for which the transaction was undertaken, whereas the note accompanying the later provision materially constrained that inquiry. In paragraph 19, the Court also addressed the legitimate-corporate-purpose approach associated with Rakesh Agrawal, observing that the Tribunal could not apply such an approach to the transactions in question consistently with the express structure of Regulation 4(1). The significance of this reasoning is not that Abhijit Rajan or Rakesh Agrawal has been retrospectively invalidated, but that the precedential value of those decisions must be confined to the legal framework and factual circumstances in which their reasoning was developed.

The Supreme Court nevertheless recognised an important qualification regarding the scope of permissible defences. In paragraphs 12 and 13, it considered the expression "including" employed in the proviso to Regulation 4(1) and the possible application of the interpretive principle of ejusdem generis. The Court observed that the enumerated defences followed the general expression "including", whereas the traditional ejusdem generis principle concerns general words following specific expressions. It therefore did not mechanically apply that interpretive rule. At the same time, the Court recognised that the use of "including" indicated that the expressly mentioned circumstances were not exhaustive and that other circumstances of the same or similar nature could potentially fall within the proviso. This aspect of the judgment is particularly important because it avoids treating the proviso as an absolutely closed statutory code while simultaneously rejecting the creation of a free-standing defence based upon general assertions of commercial necessity or corporate benefit.

The distinction between a non-exhaustive list of defences and an unrestricted discretion to excuse prohibited transactions requires careful appreciation. The circumstances contemplated by Regulation 4(1) are structured around identifiable regulatory considerations, including informational symmetry, statutory compulsion, predetermined transaction mechanisms and the segregation of information from trading decisions. A proposed defence must therefore be assessed in relation to the regulatory rationale and legal structure of the proviso rather than by reference to commercial expediency alone. The assertion that a sale was necessary to satisfy a lender, provide liquidity to the company or avoid insolvency cannot, without more, establish that the transaction falls within an exonerating circumstance. Equally, the judgment should not be interpreted as foreclosing every circumstance not expressly enumerated in the regulation; the Supreme Court deliberately preserved the possibility of circumstances of a legally comparable nature.

The Court further distinguished the finding of insider-trading liability from the determination of consequential relief. It restored the direction requiring disgorgement of approximately INR 1.38 crore representing losses avoided by the respondents, together with applicable interest, thereby recognising the statutory distinction between actual trading profit and losses averted through transactions executed in contravention of the regulatory framework. Section 11B expressly contemplates disgorgement of wrongful gain or loss avoided, and the remedial inquiry must therefore examine the economic advantage falling within that statutory formulation. However, while restoring the regulatory findings and relevant directions, the Supreme Court reduced the monetary penalty imposed upon Mr. Rajeev Vasant Sheth under Section 15G from INR 25 lakh to INR 10 lakh, considering the cumulative facts and circumstances of the case. The judgment accordingly reinforces the principle that a finding of contravention does not obviate the separate statutory inquiry concerning the appropriate penalty and other regulatory consequences.

5. THE CONTINUING IMPORTANCE OF EVIDENTIARY DISCIPLINE: RECENT SAT DECISIONS AND THE RELIANCE INDUSTRIES ORDER

The Supreme Court's approach in Rajeev Vasant Sheth should not be understood as rendering the evidentiary inquiry concerning possession, access and communication of UPSI redundant. Recent decisions of the Securities Appellate Tribunal demonstrate that the determination of insider status remains a fact-intensive exercise, particularly where SEBI relies upon indirect associations and circumstantial evidence. In Kunal Ashok Kashyap & Anr. v. SEBI, Appeal No. 542 of 2021, decided on 20 January 2025, the Tribunal considered transactions in the securities of Biocon Limited undertaken by a financial-services professional and an associated corporate entity. The proceedings involved allegations that the relevant person enjoyed frequent access to senior managerial personnel of Biocon through advisory assignments, professional relationships and the provision of broking services. Although the professional assignment directly undertaken by the individual concerned related to a different commercial transaction, the Tribunal examined the overlapping involvement of senior management, the frequency and nature of professional interactions and the concentration of relevant trading activity during the UPSI period. Applying the standard of preponderance of probabilities, the Tribunal upheld SEBI's conclusion. The decision illustrates that, where foundational circumstances establish a sufficiently substantive connection with persons possessing UPSI, the absence of direct evidence of a particular communication may not necessarily defeat a legally sustainable inference of access.[10]

A contrasting conclusion was reached in Neha Lashit Sanghvi v. SEBI, decided on 2 May 2025, concerning transactions in the securities of Aptech Limited. SEBI had relied substantially upon the existence of a long-standing relationship between the persons concerned, a brief telephone conversation during the UPSI period and subsequent securities transactions. The Tribunal examined whether these circumstances were sufficient to establish that the appellants fell within the relevant definition of insider. It also considered the difference between the statutory basis invoked in the show-cause notice and the basis subsequently adopted in the regulatory order. The Tribunal held that a solitary brief telephone conversation, without sufficient supporting material, could not automatically be treated as proof of frequent communication or access to the particular UPSI. The decision is significant not merely for its assessment of circumstantial evidence but also for the importance attached to the precise statutory allegation advanced by the regulator. A shift between allegations founded upon connected-person status and those founded upon actual possession or access may have substantive consequences for the applicable burden of proof and cannot invariably be dismissed as a procedural irregularity.[11]

Similar evidentiary considerations arose in S.V. Subha Rao v. SEBI, decided on 2 July 2025, where SEBI alleged communication of UPSI by a company's chief financial officer to a securities trader who had subsequently purchased shares before the public announcement of a significant corporate development. The Tribunal examined the surrounding communications, the relationship between the parties and the trader's broader historical trading pattern. The communications relied upon by the parties concerned matrimonial discussions between their families, while the impugned securities activity was assessed against trading undertaken across several other companies and sectors. On the particular record, the Tribunal found the evidence insufficient to sustain SEBI's conclusion and set aside the regulatory order. The decision demonstrates that suspicious timing and proximity to a person possessing UPSI may warrant investigation, but their probative sufficiency must be established in light of the complete evidentiary record. It would be incorrect, however, to convert the outcome into a general proposition that telephone calls or trading patterns are inherently incapable of constituting circumstantial evidence of communication.[12]

Another relevant decision is Rajesh Bhatia & Anr. v. SEBI, decided by the Tribunal on 27 March 2025, concerning block-deal transactions in the securities of Tree House Education and Accessories Limited. The transactions occurred against the background of proposed dealings involving Zee group entities and preliminary discussions concerning a possible merger. The Tribunal considered whether the relevant information had crystallised into UPSI at the time of the impugned trades and the significance of information symmetry between parties to a block-deal transaction. It also examined the subsequent introduction of an express regulatory exception concerning qualifying block deals. The decision illustrates the importance of identifying the precise point at which information assumes the character of UPSI, particularly during preliminary commercial negotiations. The subsequent regulatory exception cannot simply be assumed to have applied retrospectively, and the reasoning in the case must be understood in the context of the regulatory provisions and evidence applicable to the particular transactions. In light of Rajeev Vasant Sheth, the relevance of this decision is principally to the analysis of information symmetry, the formation of UPSI and the legally permissible scope of defences, rather than as authority for an unrestricted commercial-purpose exception.[13]

A further dimension of the regulatory framework was considered by the Supreme Court in Reliance Industries Limited & Ors. v. Securities and Exchange Board of India, Civil Appeal No. 9511 of 2025, by order dated 2 December 2025. The proceedings concerned the disclosure obligations arising from negotiations relating to Facebook's proposed investment in Jio Platforms Limited and the publication of media reports concerning the proposed transaction before the formal corporate announcement. SEBI had imposed a monetary penalty of INR 30 lakh in connection with the applicable disclosure obligations, and the Tribunal upheld the penalty. The Supreme Court declined to interfere, observing that the relevant findings substantially concerned questions of fact and did not give rise to a substantial question of law warranting interference. The order is distinguishable from Rajeev Vasant Sheth because its principal subject matter was the obligation to disclose material corporate information rather than the liability of a person trading while possessing UPSI. Nevertheless, it reinforces the regulatory significance of prompt and adequate public dissemination of material information, particularly where confidential negotiations become the subject of sufficiently specific market reports. The distinction between a negotiated transaction remaining confidential and information becoming sufficiently credible, concrete or selectively available to require disclosure is therefore relevant to the broader operation of the insider-trading regime.[14]

The combined effect of these decisions is that the contemporary enforcement framework operates through a sequence of analytically distinct questions. The first concerns whether the information qualifies as UPSI under the applicable version of the regulations. The second concerns whether the alleged insider satisfies the relevant definition through connected-person status, possession or access. The third concerns whether the alleged communication or trading activity is established through legally sufficient evidence. The fourth concerns whether the statutory prohibition is attracted and whether the relevant person can demonstrate an available circumstance of exoneration. Only thereafter do questions concerning penalties, disgorgement and other regulatory consequences arise. The significance of Rajeev Vasant Sheth lies principally in the fourth stage; it does not authorise the regulator or adjudicatory authority to dispense with the preceding statutory and evidentiary inquiries.

6. SANOFI INDIA: RECONCEPTUALISING THE ATTRIBUTION OF CORPORATE CRIMINAL LIABILITY

The decision in Sanofi India Ltd. v. Central Bureau of Investigation, 2026 INSC 957, addresses a fundamentally different legal question from the possession-based prohibition under the PIT Regulations. The proceedings originated in allegations concerning the procurement of pharmaceutical products by the Rare Materials Project of the Bhabha Atomic Research Centre. The Central Bureau of Investigation alleged that a public official had entered into a criminal conspiracy involving irregular procurement processes and the purchase of medicines at inflated rates. The alleged irregularities included the misclassification of pharmaceutical products as proprietary items, exclusion of competing bidders and the rejection of lower quotations. The prosecution alleged wrongful loss to BARC amounting to INR 3,53,361 and illegal gratification amounting to INR 42,750. The chargesheet proceeded against the concerned public official and Sanofi India Limited ("Sanofi") for specified offences under the Indian Penal Code, 1860 and the Prevention of Corruption Act, 1988. However, no employee, director or officer of Sanofi was separately arraigned as an accused.[2]

Sanofi sought quashing of the proceedings principally on the ground that a corporate entity could not be prosecuted independently for an offence involving mens rea without identifying and prosecuting the natural person whose state of mind was alleged to constitute the corporation's guilty mind. The Karnataka High Court rejected this contention, relying upon established Supreme Court jurisprudence recognising that companies may be prosecuted for offences requiring proof of criminal intention. Before the Supreme Court, the controversy therefore concerned whether the absence of an identified and arraigned individual constituted a jurisdictional or legal impediment to the continuation of the prosecution. Although the immediate question appeared procedural, its determination necessarily required the Court to examine the substantive principles by which the acts and mental states of natural persons may be attributed to a corporation.

The Supreme Court commenced its doctrinal analysis by examining the conceptual difficulty associated with corporate criminal responsibility. A corporation possesses a separate legal identity, yet it is an artificial juridical person incapable of independently undertaking physical conduct or forming a mental state in the manner of a natural person. Traditional criminal jurisprudence is generally founded upon the concurrence of actus reus, representing the prohibited conduct, and mens rea, representing the requisite mental element. A corporation necessarily acts through directors, officers, employees or other agents, thereby requiring a legal mechanism through which the conduct and state of mind of relevant natural persons may be treated as those of the corporation itself. The Court recognised that modern corporate activity may cause substantial social and economic harm, and that a corporation's artificial legal personality cannot operate as a general exemption from criminal responsibility. The challenge is therefore not whether a corporation may incur criminal liability, but how such liability is properly established without abandoning the fundamental requirements of the offence in question.

Indian jurisprudence had already recognised the criminal responsibility of corporations in Standard Chartered Bank v. Directorate of Enforcement, (2005) 4 SCC 530, and Iridium India Telecom Ltd. v. Motorola Inc., (2011) 1 SCC 74. In Standard Chartered Bank, the Supreme Court held that the inability of a corporate entity to undergo imprisonment did not render it immune from prosecution for an offence carrying a mandatory sentence of imprisonment and fine. In Iridium India, the Court confirmed that corporate entities could possess attributable mens rea and be prosecuted for offences requiring a guilty mind. However, these authorities principally resolved the threshold question of corporate capacity to incur criminal responsibility. They did not furnish a comprehensive and generally applicable mechanism for identifying whose knowledge, conduct or intention should be attributed to a corporation in relation to a particular criminal offence. The significance of Sanofi lies in its attempt to fill that doctrinal gap through a structured and transaction-specific attribution framework.[15]

In formulating this framework, the Supreme Court undertook an extensive examination of English jurisprudence, including Lennard's Carrying Co. Ltd. v. Asiatic Petroleum Co. Ltd., [1915] AC 705; Tesco Supermarkets Ltd. v. Nattrass, [1972] AC 153; Meridian Global Funds Management Asia Ltd. v. Securities Commission, [1995] 2 AC 500; and the decisions arising from the prosecution proceedings concerning Barclays. The traditional identification doctrine associated with Tesco Supermarkets sought to identify persons whose conduct could properly be regarded as constituting the corporation's own conduct, commonly through the concept of the "directing mind and will". However, the limitations of an excessively status-oriented approach became apparent in complex corporate structures where substantive authority may be distributed through multiple levels of management. The subsequent approach in Meridian Global distinguished between primary rules of attribution, general rules of attribution and special rules justified by statutory purpose. The Barclays decisions further developed a sequential approach to these principles, requiring attention to the authority conferred upon particular individuals in relation to the transaction or function concerned.[16]

The Supreme Court adopted a hierarchical three-stage framework, set out in paragraphs 143–151 and summarised in paragraph 171 of Sanofi. At the first stage, the inquiry concerns whether the corporation's constitutional documents or rules implied by company law vest the relevant natural person with authority to undertake the particular act. The constitutional documents, including the memorandum and articles of association where applicable, constitute the principal starting point. However, the inquiry is not confined to express constitutional provisions and may extend to authority implied under the relevant principles of company law. Where the natural person's authority to undertake the relevant act is established through these sources, the conduct and accompanying mental state may, subject to the applicable limitations, be treated as those of the corporation. This stage is accordingly concerned with authority over the specific act rather than the person's general importance within the organisation.

Where attribution cannot be established through the first stage, the inquiry proceeds to the second stage, which concerns authority conferred through express or implied delegation. The Supreme Court emphasised that delegation must be accompanied by sufficient independence and discretion in undertaking the relevant act. A person authorised merely to execute documents implementing terms already determined by the board may not necessarily possess the substantive authority relevant to attribution of the underlying commercial decision. Conversely, where an officer has been validly entrusted with the authority to determine material terms and exercise independent commercial judgment, the position may be materially different. The distinction between substantive decision-making authority and administrative implementation is therefore central to this stage of the framework. Its application may require examination of board resolutions, committee mandates, delegation-of-authority matrices, internal reporting arrangements and evidence concerning the actual exercise of responsibility.

The third stage introduces a more flexible inquiry informed by the purpose of the statute creating the offence. Where attribution cannot be established through the constitutional documents or delegated authority, the Court must consider whether the statutory provision requires the formulation of a special rule under which the acts and mental state of the relevant natural person may be attributed to the corporation. The precise inquiry depends upon the nature of the statutory purpose. Where that purpose is narrow and readily identifiable, the Court examines whether the language, context and policy of the provision require the acts or knowledge of a particular class of persons to count as those of the corporation. Where the statutory purpose is broader and capable of applying across materially different factual circumstances, the inquiry must consider whether the statutory objective, as applied to the circumstances of the particular case, requires such a special rule. The Court was careful to explain that the formulation of a special attribution rule does not constitute an extraordinary judicial function but is an exercise in ordinary statutory construction.[2]

Several important qualifications accompany the framework. First, the Supreme Court rejected the existence of a universal status-based rule under which the acts of a person holding a senior position are automatically attributable to the corporation. Secondly, attribution remains transaction-specific and does not involve identifying a corporation's directing mind in the abstract. Thirdly, the framework principally concerns offences requiring proof of mens rea where the statutory provision does not itself establish an alternative attribution mechanism. Fourthly, where legislation expressly prescribes whose conduct constitutes corporate conduct, establishes statutory vicarious liability or imposes responsibility independently of mens rea, the statutory scheme must govern. Fifthly, the framework operates from the natural person to the corporation and does not establish reciprocal liability of the natural person merely because corporate responsibility is established. The Court also recognised that circumstances may exist in which attribution should not follow notwithstanding the existence of authority, including questions associated with fraud committed against the corporation itself.

A particularly important clarification appears in paragraph 178, where the Supreme Court recognised that the requisite corporate mens rea must be attributable from a complete mental state possessed by at least one relevant natural person. Corporate criminal intention cannot ordinarily be assembled by combining incomplete states of mind independently possessed by different individuals. This proposition is relevant to complex corporate structures in which commercial information and decision-making responsibilities may be divided between departments. However, it should not be misunderstood as establishing that the distribution of information and responsibility necessarily defeats corporate criminal liability. The substantive question remains whether the legally requisite mental state exists in a natural person whose conduct and knowledge are attributable to the corporation under the governing framework.

The Court ultimately held that neither identification nor arraignment of a particular natural person could be treated as a universal prerequisite for maintaining criminal proceedings against a corporation. The absence of a separately prosecuted director, officer or employee does not, by itself, justify quashing the proceedings under Section 482 of the Code of Criminal Procedure, 1973. At the same time, the Court clarified that a prosecution must disclose sufficient allegations indicating that natural persons acted for the corporation, that the relevant conduct was referable to the alleged offence and that the surrounding circumstances did not render the existence of the requisite mental element patently absurd or inherently improbable. In other words, the prosecution need not necessarily establish the complete attribution case at the threshold stage, but it cannot proceed solely upon a bare assertion that the corporation committed an offence without identifying any factual basis for the alleged corporate conduct.

The Supreme Court further distinguished authorities concerning statutory vicarious liability, including Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661. That decision arose in the context of Section 141 of the Negotiable Instruments Act, 1881, where the statute expressly conditions the derivative liability of persons in charge of the company's affairs upon the commission of the relevant offence by the company. The principle requiring arraignment of the company under that statutory scheme cannot be transformed into a general requirement that every prosecution against a corporation must necessarily include one or more natural persons as co-accused. The distinction between primary corporate liability and derivative statutory liability is therefore indispensable when determining whether a prosecution is maintainable.

On the facts before it, the Supreme Court dismissed Sanofi's appeal, holding that the proceedings could not be quashed on the grounds advanced. The dismissal was not a final adjudication of Sanofi's guilt, nor did it conclusively establish that the alleged conduct and mental state had been attributed to the company. Those questions remained subject to the appropriate determination on the evidence. The significance of the judgment is accordingly both substantive and procedural: it provides a principled attribution framework while refusing to convert the absence of separately arraigned individuals into a categorical immunity for corporate entities facing prosecution.[2]

7. THE INTERSECTION OF SANOFI AND INSIDER TRADING: CORPORATE KNOWLEDGE, REGULATORY PRESUMPTIONS AND ATTRIBUTION

The interaction between Sanofi and Rajeev Vasant Sheth requires particular doctrinal caution because the two judgments concern different species of legal responsibility. Sanofi principally addresses the attribution of criminal conduct and mens rea where the commission of an offence requires proof of a particular mental element. Rajeev Vasant Sheth, on the other hand, addresses the operation of a statutory regulatory prohibition applicable to trading while possessing UPSI. The fact that both decisions involve concepts of knowledge, corporate conduct and legal presumptions does not mean that they operate through an identical test. A regulatory contravention established through the possession-based mechanism prescribed by Regulation 4(1) cannot automatically be subjected to an additional requirement of proving fraudulent intention merely because the alleged insider is a corporate entity. Conversely, the existence of a regulatory presumption under the PIT Regulations does not dispense with the separate ingredients of any criminal offence that may be alleged under the SEBI Act or other applicable legislation.

This distinction is particularly important because the SEBI Act and the PIT Regulations contain provisions expressed in different terms. Regulation 4(1) expressly prohibits trading while in possession of UPSI, whereas Section 15G refers, in its relevant limb, to dealing in securities on the basis of unpublished price sensitive information. The two provisions must be read within their statutory context, including the judicial interpretation of the regulatory prohibition and the legislative framework governing monetary penalties. Rajeev Vasant Sheth upheld the imposition of liability under the PIT Regulations and addressed the consequential penalty under Section 15G without undertaking a separate comprehensive analysis of every possible conceptual distinction between the statutory expressions. Accordingly, it would be inappropriate to infer that the judgment has conclusively resolved all questions concerning the interaction between the language of Section 15G and Regulation 4(1), particularly in hypothetical proceedings involving materially different allegations or procedural contexts. The controlling proposition is that, on the admitted facts before the Court, the commercial purpose and absence of substantial profit did not displace the liability established under the PIT Regulations.

The position becomes more complex where the alleged insider is a non-individual entity, such as a company, investment fund, institutional shareholder or other corporate vehicle. Regulation 4(1) expressly contemplates exonerating circumstances for non-individual insiders where the individuals possessing UPSI are different from those taking trading decisions, the trading decision-makers did not possess UPSI and adequate arrangements were maintained to prevent the prohibited communication of information. This statutory mechanism recognises the practical reality that institutional entities may conduct operations through separate teams possessing different categories of information. However, it is not sufficient merely to show that different employees were formally assigned to different departments. The relevant conditions must be established in substance, including the effective separation of information and decision-making functions and the adequacy of the arrangements maintained to prevent communication of UPSI.

The analytical relevance of Sanofi in this context lies in its insistence upon a transaction-specific inquiry into authority and decision-making rather than a generalised attribution of corporate knowledge. The Court's reasoning may provide useful conceptual guidance when examining whose conduct constituted the relevant corporate decision, the extent of that person's delegated authority and the relationship between informational possession and transaction execution. Nevertheless, the actual defence available to non-individual insiders is governed by the express requirements of Regulation 4(1). It would therefore be doctrinally unsound to contend that the three-stage criminal-attribution framework in Sanofi automatically displaces or overrides the regulatory mechanism specifically prescribed for institutional insiders.

The distinction between corporate attribution and individual liability also assumes importance where proceedings are instituted against companies and their directors or officers simultaneously. The Supreme Court's observations in Sanofi make clear that attribution of a natural person's conduct to a corporation does not, by itself, establish the liability of every other individual associated with that corporation. Equally, the existence of corporate liability does not eliminate the need to establish the statutory requirements applicable to an individual accused of an independent contravention. In insider-trading matters, a director may qualify as a connected person under the relevant regulatory definition, but the substantive question whether the director contravened Regulation 3, Regulation 4 or another provision must still be determined according to the applicable statutory requirements. Corporate designation, signing authority and membership of a committee may be relevant factual considerations, but they should not be treated as substitutes for the elements necessary to establish the particular allegation.

The decisions also require attention to the distinction between corporate commercial benefit and statutory legality. A transaction undertaken pursuant to a valid board resolution, in furtherance of an approved restructuring or for the purpose of preserving a company's financial viability may be commercially justified and properly authorised under company law. Such authority does not, however, necessarily establish compliance with securities legislation. Following Rajeev Vasant Sheth, the fact that the proceeds of a promoter's securities sale were intended to satisfy creditors or support the company does not provide an automatic defence where the transaction was undertaken while the promoter possessed UPSI. The legal validity of corporate authorisation and the permissibility of securities trading are separate inquiries. An act may be validly authorised within the corporate governance structure while independently attracting regulatory consequences under the PIT Regulations.

8. EVIDENTIARY BURDENS, ENFORCEMENT CONSEQUENCES AND THE ROLE OF PROCEDURAL FAIRNESS

The combined jurisprudence reinforces the importance of distinguishing the evidentiary threshold required to establish liability from the standard applicable to subsequent regulatory consequences. Under the PIT Regulations, the burden of establishing the relevant foundational facts depends upon the statutory basis of the allegation, including the deeming provisions applicable to connected persons and the express allocation of evidentiary responsibility. The regulatory framework must not be understood as permitting the automatic inference of actual communication of UPSI merely because the alleged recipient traded during a relevant period. Equally, the absence of direct documentary evidence does not invariably preclude reliance upon circumstantial material. The proper inquiry concerns whether the evidence, assessed cumulatively and according to the applicable standard of proof, supports the precise statutory allegation advanced by SEBI. The conclusions reached in Kunal Ashok Kashyap, Neha Lashit Sanghvi and S.V. Subha Rao illustrate that materially different results may follow depending upon the quality of the evidence, the nature of the relationship between the relevant persons and the particular regulatory definition invoked.

The role of the show-cause notice is especially important in this respect. A noticee must be informed of the substance of the allegation, the relevant statutory provisions and the material relied upon sufficiently to enable an effective response. A regulatory order should not proceed upon a materially different factual or legal foundation without affording the noticee a proper opportunity to address that case. This principle is consistent with the Supreme Court's decision in T. Takano v. Securities and Exchange Board of India, (2022) 8 SCC 162, which concerned the duty to disclose relevant investigative material in proceedings under the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. Although that decision arose under a different regulatory framework, its treatment of procedural fairness and access to material relevant to the proposed action has broader significance for securities-market enforcement. The right to an effective defence must be considered alongside legitimate concerns relating to confidentiality, third-party information and market-sensitive material; neither regulatory secrecy nor a demand for unrestricted disclosure supplies a universally applicable answer.[17]

A separate inquiry arises in determining penalties and remedial directions after a contravention has been established. In Chairman, SEBI v. Shriram Mutual Fund, (2006) 5 SCC 361, the Supreme Court recognised the significance of statutory liability for civil regulatory contraventions and rejected the proposition that proof of criminal mens rea was universally necessary for the imposition of monetary penalties under the relevant regulatory framework. However, the subsequent judgment in Adjudicating Officer, Securities and Exchange Board of India v. Bhavesh Pabari, (2019) 5 SCC 90, clarified the operation of Section 15J, holding that the circumstances enumerated therein are illustrative and do not necessarily exclude consideration of other relevant aggravating or mitigating factors in determining the quantum of penalty. The Court also distinguished the requirements for establishing the substantive contravention from the considerations relevant to penalty determination. These authorities demonstrate that the absence of criminal intent may be insufficient to defeat a civil regulatory contravention, while the statutory framework may nevertheless permit consideration of relevant circumstances when determining the appropriate sanction.[18]

The decision in Rajeev Vasant Sheth is consistent with this distinction. The Supreme Court restored the regulatory finding and disgorgement directions while separately moderating the monetary penalty imposed upon the principal respondent. The distinction assumes particular significance in insider-trading matters because wrongful gain may arise through the avoidance of a loss rather than the receipt of an immediately measurable trading profit. Disgorgement under Section 11B serves a distinct statutory function from a monetary penalty under Section 15G, and the legal basis and quantification of each consequence must be assessed independently. An alleged insider may therefore fail in an argument that absence of profit defeats liability while retaining separate grounds to contest the calculation of losses avoided, the quantum of penalty or the proportionality of particular regulatory directions, depending upon the applicable statutory powers and evidence.

In criminal proceedings involving corporate entities, procedural safeguards arise in a different form. The Sanofi framework does not eliminate the requirement that an offence involving mens rea be established according to its governing substantive provisions. Nor does it authorise courts to infer corporate guilt from the mere existence of commercial transactions with persons accused of wrongdoing. It clarifies that the absence of an identified or arraigned employee is not, by itself, a universal basis for quashing the prosecution, while preserving the requirement that the allegations disclose conduct undertaken on behalf of the corporation and circumstances capable of supporting the requisite mental element. At the threshold stage, the court is not expected to conduct a detailed evidentiary evaluation or determine disputed issues ordinarily reserved for trial. Nevertheless, the prosecution must disclose a legally recognisable factual basis for proceeding against the corporation. This distinction between maintainability and ultimate guilt is essential to understanding the actual scope of the decision.

9. IMPLICATIONS FOR CORPORATE GOVERNANCE, TRANSACTION STRUCTURING AND SECURITIES COMPLIANCE

For listed companies, the implications of the recent jurisprudence extend substantially beyond the drafting of insider-trading policies. The expanded concept of UPSI and the Supreme Court's treatment of possession-based liability require companies to consider when information concerning material corporate developments first becomes sufficiently definite and price sensitive to attract regulatory restrictions. This may occur before formal board approval, execution of definitive agreements or public announcement, depending upon the particular nature of the information and the applicable legal requirements. Accordingly, the legal and compliance assessment of proposed mergers, fundraising transactions, debt restructuring, insolvency proceedings, material litigation settlements and regulatory developments should not be postponed until the transaction reaches its concluding stage. Companies should maintain defensible contemporaneous records concerning the evolution of information, its classification as UPSI, the persons granted access and the measures adopted to regulate further dissemination.

The regulatory requirement to maintain a structured digital database under Regulation 3(5) forms an important component of this framework. The identification of persons sharing and receiving UPSI, together with the preservation of relevant records, serves not merely an administrative purpose but may have substantive evidentiary consequences in subsequent proceedings. A properly maintained database, supported by confidentiality arrangements, access controls and internal communications records, may assist in establishing when particular information was shared and whether a person alleged to possess UPSI was actually within the relevant information chain. Conversely, deficiencies in these records may complicate the company's ability to reconstruct events and respond effectively to regulatory allegations. Although the absence of a database entry cannot necessarily be equated with proof that information was not communicated, and the presence of an entry does not by itself establish a prohibited trade, these records may materially influence the evidentiary assessment.

Institutional investors and non-individual insiders require particular attention because their internal structures often involve separate functions responsible for investment evaluation, compliance oversight, portfolio execution and corporate advisory activities. The availability of the circumstances contemplated under Regulation 4(1) depends upon substantive informational separation rather than the mere formal existence of different departments. A compliance system should therefore be capable of establishing which persons possessed the relevant UPSI, who exercised authority over the trading decision, whether those decision-makers had access to the information and whether the applicable restrictions were maintained in practice. The transaction-specific approach in Sanofi provides additional conceptual support for examining the actual allocation of authority, but the operative compliance standard remains the one prescribed by the PIT Regulations.

The judgments are equally relevant to promoters and significant shareholders contemplating disposal of securities during periods of financial distress. A promoter may face contractual obligations under pledge arrangements, financing documents, restructuring agreements or lender demands requiring disposal of shareholdings or infusion of funds. Nevertheless, a contractual or commercial obligation cannot automatically be treated as equivalent to the statutory or regulatory obligation contemplated by Regulation 4(1). The legal character of the obligation and the conditions of any relevant exonerating circumstance must be examined independently. In particular, a sale undertaken to satisfy a financing requirement or preserve the issuer's financial viability cannot be justified merely through the assertion that the transaction did not confer a personal benefit. Following Rajeev Vasant Sheth, this is a materially less reliable defence than it may have appeared under some interpretations of the earlier regulatory framework.

For directors and senior management personnel, Sanofi reinforces the necessity of maintaining clarity concerning corporate authority. The actual allocation of power under constitutional documents, board resolutions, committee charters and delegation arrangements may become relevant where allegations of corporate criminal misconduct arise. However, formal delegation structures should accurately reflect substantive decision-making responsibilities rather than being drafted principally to distance the corporation from operational conduct. The Supreme Court's third stage of attribution expressly recognises that statutory purpose may justify attribution beyond the narrow constitutional or delegation-based approaches. Consequently, an organisation cannot assume that the division of responsibilities or absence of a formally designated decision-maker will necessarily preclude corporate criminal responsibility.

A further consequence relates to internal investigations and responses to regulatory proceedings. Companies may be required to reconstruct the chronology of negotiations, information flows and transaction approvals over extended periods. The evidence necessary to determine whether UPSI existed at a particular point may differ from that required to establish the alleged recipient's possession of it, while the evidence concerning execution of trades may involve exchange records, depository statements, investment approvals and communications with brokers or counterparties. In corporate criminal proceedings, the inquiry may extend to the authority exercised by particular individuals and the mental state accompanying the relevant conduct. Internal investigation protocols should therefore be tailored to the specific legal questions arising rather than treating every regulatory or criminal inquiry as an undifferentiated exercise in identifying responsible employees.

10. CONCLUSION: TOWARDS A MORE STRUCTURED DOCTRINE OF CORPORATE AND SECURITIES-MARKET LIABILITY

The judgments in Sanofi India Ltd. v. Central Bureau of Investigation and Securities and Exchange Board of India v. Rajeev Vasant Sheth represent important developments in the Supreme Court's approach to corporate responsibility and securities-market regulation. Their significance lies not in the creation of an unrestricted presumption of corporate culpability, but in the refinement of the legal inquiries through which liability is established. Sanofi provides a hierarchical and transaction-specific framework for attributing criminal conduct and mens rea to corporations, while rejecting the proposition that the absence of separately arraigned individuals necessarily renders corporate prosecution unsustainable. Rajeev Vasant Sheth clarifies that the possession-based prohibition under Regulation 4(1) cannot ordinarily be defeated by invoking commercial necessity, legitimate corporate purpose or the absence of substantial trading profit after the foundational requirements of the contravention have been established.

These decisions must be read alongside the established jurisprudence concerning evidentiary sufficiency, statutory presumptions and procedural fairness. Chintalapati Srinivasa Raju and Balram Garg continue to underscore the necessity of identifying a legally sustainable basis for alleging access, possession or communication of UPSI. Kishore R. Ajmera recognises the legitimate role of circumstantial evidence in securities-market proceedings, while the recent decisions of the Securities Appellate Tribunal demonstrate the importance of evaluating such evidence in relation to the particular statutory allegation. Abhijit Rajan remains relevant to understanding the earlier regulatory approach, but its application to transactions governed by the PIT Regulations is materially constrained by the distinction drawn in Rajeev Vasant Sheth. Likewise, the corporate-attribution principles articulated in Sanofi must be applied having regard to the statute creating the relevant offence and should not be transposed indiscriminately into regulatory provisions imposing a different form of liability.

The broader jurisprudential development is therefore one of statutory specificity rather than doctrinal uniformity. The existence of a corporation, the status of its officers, the presence of a commercial justification or the absence of demonstrable profit cannot independently determine whether liability arises. The governing statutory provision, the nature of the alleged conduct, the applicable evidentiary burden and the legally recognised circumstances of exoneration must each be examined in their proper sequence. For companies and securities-market participants, this places increasing importance upon the contemporaneous documentation of information flows, effective institutional controls, transaction-specific authority and legally defensible decision-making processes.

Ultimately, the Supreme Court's recent jurisprudence reinforces the proposition that corporate and securities-market accountability must be founded upon the applicable statutory elements, legally sustainable attribution and properly established facts, rather than upon assumptions concerning corporate status, commercial motive or individual intention. The continuing development of this framework will depend upon the manner in which courts and regulatory authorities reconcile statutory presumptions with evidentiary safeguards, and the flexible requirements of corporate attribution with the legislative objectives of investor protection and market integrity.

AUTHORITIES AND REFERENCES

[1] Securities and Exchange Board of India v. Rajeev Vasant Sheth & Ors., Civil Appeal No. 4905 of 2022, decided on 11 August 2026, 2026 INSC 826, particularly paragraphs 7–20. 

[2] Sanofi India Ltd. v. Central Bureau of Investigation, Criminal Appeal No. 4250 of 2026, decided on 7 September 2026, 2026 INSC 957, particularly paragraphs 140–174 and 177–199.

[3] Standard Chartered Bank v. Directorate of Enforcement, (2005) 4 SCC 530; Iridium India Telecom Ltd. v. Motorola Inc., (2011) 1 SCC 74.

[4] Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, as amended, particularly Regulations 2(1)(d), 2(1)(g), 2(1)(n), 3, 4, 5 and 9. 

[5] Chintalapati Srinivasa Raju v. Securities and Exchange Board of India, (2018) 7 SCC 443, decided on 14 May 2018. 

[6] Balram Garg v. Securities and Exchange Board of India, (2022) 9 SCC 425, decided on 19 April 2022, particularly paragraphs 32 and 47–49.

[7] Securities and Exchange Board of India v. Kishore R. Ajmera, (2016) 6 SCC 368.

[8] Rakesh Agrawal v. Securities and Exchange Board of India, 2003 SCC OnLine SAT 38; expressly discussed in paragraph 19 of Rajeev Vasant Sheth.

[9] Securities and Exchange Board of India v. Abhijit Rajan, (2024) 11 SCC 645, decided on 19 September 2022; Civil Appeal No. 563 of 2020.

[10] Kunal Ashok Kashyap & Anr. v. Securities and Exchange Board of India, SAT Appeal No. 542 of 2021, decided on 20 January 2025.

[11] Neha Lashit Sanghvi v. Securities and Exchange Board of India, Securities Appellate Tribunal, decided on 2 May 2025.

[12] S.V. Subha Rao v. Securities and Exchange Board of India, SAT Appeal Nos. 712 and 713 of 2024, decided on 2 July 2025.

[13] Rajesh Bhatia & Anr. v. Securities and Exchange Board of India, Securities Appellate Tribunal, decided on 27 March 2025. 

[14] Reliance Industries Limited & Ors. v. Securities and Exchange Board of India, Civil Appeal No. 9511 of 2025, Supreme Court order dated 2 December 2025. 

[15] Standard Chartered Bank v. Directorate of Enforcement, (2005) 4 SCC 530; Iridium India Telecom Ltd. v. Motorola Inc., (2011) 1 SCC 74; Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661.

[16] Lennard's Carrying Co. Ltd. v. Asiatic Petroleum Co. Ltd., [1915] AC 705; Tesco Supermarkets Ltd. v. Nattrass, [1972] AC 153; Meridian Global Funds Management Asia Ltd. v. Securities Commission, [1995] 2 AC 500; Serious Fraud Office v. Barclays Plc & Anr., [2018] EWHC 3055 (QB).

[17] T. Takano v. Securities and Exchange Board of India, (2022) 8 SCC 162, decided on 18 February 2022.

[18] Chairman, SEBI v. Shriram Mutual Fund, (2006) 5 SCC 361; Adjudicating Officer, Securities and Exchange Board of India v. Bhavesh Pabari, (2019) 5 SCC 90.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.