P.S. Dinesh Kumar, Presiding Officer

These two appeals are directed against order dated 23.09.2025 passed by the AO1, SEBI2 imposing penalty against the appellants for violation for the SEBI (PIT) Regulations, 20153.

2. Appeal No.531 of 2015 is filed by Nitin Kumar Garg ('Nitin' for short) and Appeal No.532 of 2025 is by Anupam Gupta ('Anupam' for short). We have heard both appeals together and disposing of by this common order.

3. We have heard Mr. Adil Sharfuddin, learned Advocate for the appellants and Ms. Prapti Kedia, learned Advocate for the SEBI.

4. Brief facts of the case are, Nitin4 was an employee with Nucleus Software Exports Limited ('Company' for short). The Company disclosed its financial results for the quarter and year ended 31.03.2023 to the stock exchanges on 26.05.2023 during the trading hours. The net profit of the Company on a standalone basis for the quarter ending March, 2023 had increased by 76.45% and on year on year basis increased by Adjudicating Officer Securities and Exchange Board of India SEBI (Prohibition of Insider Trading) Regulations, 2015 Appellant in Appeal No.531 of 2025 209.66% respectively from March, 2022 to March, 2023. After declaration of financial results on 26.05.2023, Company's scrip closed at ₹809.30 witnessing a rise of 19.99%. Thus, the financial results had a positive impact on the share price. SEBI conducted an investigation to ascertain whether noticee No.1, Anupam5 had traded on the basis of UPSI6. It was observed that Anupam had purchased 300 shares of the Company on 13.04.2023, 720 shares on 17.04.2023 and 2000 shares on 25.05.2023 and in all 3,020 shares at an average price of ₹629.73. He sold 1,020 shares on the date of announcement i.e.26.05.2023 and 980 shares on 29.05.2023 and 1,020 shares on 30.05.2023 and made a profit of ₹8.98 Lakhs. The investigation conducted by SEBI revealed that Anupam was Nitin's cousin, who was working with the Company. They had conversation with regard to the financial performance of the Company.

5. A show cause notice was issued alleging inter alia that Nitin was in possession of UPSI regarding the financial results of the Company for the quarter ended 31.03.2020 which he communicated to Anupam who had traded in the scrip, while being in possession of the UPSI. Both appellants submitted their respective replies. After adjudication, the impugned order imposing penalty of ₹10 Lakhs on Anupam Gupta and ₹15 Lakhs Appellant in Appeal No.532 of 2025 Unpublished Price Sensitive Information on Nitin Kumar Garg under Section 15G of the SEBI Act, 19927 for violation of PIT Regulations has been passed.

6. Mr. Adil Sharfuddin, learned Advocate for the appellants submitted that:

                   * Anupam had traded in his normal course of business;

                   * Nitin did not possess any UPSI. He had only mentioned that the Company was going to make good profit;

                   * There is no proof of communication of UPSI. Call records and WhatsApp data establish the existence of communication, not its content. No transcript or forensic report has been produced to show that the contents of the any communication was price sensitive;

                   * Based on the family relation, it cannot be concluded that UPSI was communicated as held in Balram Garg v. SEBI8;

                   * Statements recorded during the investigation are not conclusive proof. The statements only reflect general discussions about the Company's business performance and prospects;

Securities and Exchange Board of India Act,1992 2022 SCC OnLine SC 472 • The alleged UPSI was already anticipated and discussed in the public domain. The 50% price rise in Company's share proves that the market already had the information; and • The penalty imposed on the appellants is disproportionate and contrary to law.

7. In reply, Ms. Prapti Kedia for the SEBI submitted that appellants in their statements recorded by SEBI have admitted that Nitin had conveyed to Anupam that the Company was going to declare huge profit in the upcoming announcement of financial results. Nitin had asked Anupam to purchase Company's shares in April, 2023 and he had also given money to invest in the scrip. She further submitted that the WhatsApp chats extracted in the order show that the appellants were in conversation with regard to the purchase and sale of Company's shares. She adverted to various portions of the order and argued that the case is evidenced on the admission of parties.

8. We have carefully considered rival contentions and perused the records.

9. Admitted facts are, Nitin is an employee with Nucleus Software Exports Limited. Anupam is his cousin (maternal Aunt's son). Anupam's statement recorded on 07.08.2024 reads thus:

                   "I myself placed these trades. I received money from Shri Nitin Garg for the purpose of investment into shares of Nucleus. Some money was added by me too in the total amount to be invested. The money was returned in the proportion of his investment to the total amount invested by us together. I had roughly invested 2-3 lakhs and he invested around 9-10 lakhs. I returned around 18 lakhs to him.

                   It was done in conjunction with Nitin because of the confidence shown by him in the performance and prospects of his company. Later, I solely invested in all other scrips without any investment being received from Mr. Nitin Garg. No, he did not share any financial information. However, he did say that the company was going to do very well and the scrip is going to do well. He showed confidence in the performance of his company and was himself putting in 9-10 lakhs and because of this confidence I also invested 2-3 lakhs.

                   No other scrip. Now, in retrospect, I feel that my trading account was used as a mule account by Mr. Nitin Garg to invest in the scrip of Nucleus.

                   I invested in the scrip of Nucleus during April and May 2023 after being asked by my cousin Mr. Nitin Garg. He showed confidence for the future performance of his company and its scrip. Therefore, I invested in the scrip and returned the amount invested by Nitin proportionate to his investment. At that time, I did not realise that this could be treated as mala fide."

10. Nitin's statement recorded on the same day reads thus:

                   "I gave money to Mr. Anupam Gupta who is my cousin for investing in the scrip of Nucleus Software Exports Ltd. through my bank account and father's bank account.

                   I knew that the company was going to make very good profit before the announcement as it was commonly discussed at the office that the company is going to declare huge profit in the upcoming announcement regarding financial results. I additionally knew that the company had increased AMC cost for all the customers multifold. I was confident that the company's scrip is going to do well. Therefore, I asked Mr. Anupam Gupta to purchase the shares of Nucleus in April- May 2023 and I also sent him money to invest in the scrip.

                   We regularly communicate via mobile calls and meet during family gatherings, where we discuss family matters and other topics. In March/April 2023, we talked about job opportunities at Nucleus. During this conversation, I mentioned about the company's strong future growth, some customer names, and the appraisal I received. I informed him that I received an approximate 25% appraisal for the year 2022-23 and also expecting a favorable appraisal for the year 2023-24 as well. I told him to not worry and invest in the scrip of Nucleus and mentioned that the company is going to do very well.

                   I did not use my own trading account because of fear of being caught of trading in my own company's scrip prior to announcement.

                   Through all this I learnt that if we do something illegal then it gets highlighted in the end anyhow and so it should not be done thinking that it will not be caught. I am only responsible for all this and I used my father's bank account to transfer funds to Mr. Anupam Gupta. My father is not responsible for any of this and I am solely responsible for it."

                   (Emphasis Supplied)

11. Appellants have not denied or retraced the above statements. A careful analysis of the statements shows that:

                   * Nitin had given money to Anupam to invest. Anupam also had invested some money. Anupam returned around ₹18 Lakhs to Nitin in proportion of his investment;

                   * Anupam did not realise that such transactions could be illegal;

                   * Nitin had gathered information from the common discussion in the office that the Company was going to declare huge profit in the upcoming announcement of financial results. He also had additional information about increased AMC cost. Therefore, he sent money to Anupam and asked him to invest in Company's shares; and • He did not use his own trading account because of fear of being caught while trading in his own Company's scrip prior to announcement.

12. Nitin's statement also shows that he regretted for having indulged in this activity and he has stated that he was solely responsible for the act and not his father as he had transferred some money from his father's account also. Thus, it is established that Nitin being an employee, had traded in his own Company's shares through his cousin Anupam based on the information that the Company was going to declare profit in the ensuing financial announcement.

13. The information that Nucleus Software was going to declare huge profit in the ensuing financial results was not generally available to investors in the securities market. 'generally available information' is defined as follows in Regulation 2(1)(e) of PIT Regulations:

                   2. (1) (e) "generally available information" means information that is accessible to the public on a non-discriminatory basis;"

14. Regulation 2(1)(g) of PIT Regulations defines an 'Insider' as a person who is 'connected person' or 'in possession of having access to UPSI'.

15. Regulation 2(1)(n) of PIT Regulations defines 'UPSI' as follows:

                   "2. (1) (n) "unpublished price sensitive information" means any information, relating to a company or its securities, directly or indirectly, that is not generally available which upon becoming generally available, is likely to materially affect the price of the securities and shall, ordinarily including but not restricted to, information relating to the following: -

                   (i) financial results;

                   (ii) dividends;

                   (iii) change in capital structure;

                   (iv) mergers, de-mergers, acquisitions, delistings, disposals and expansion of business

                   (v) and such other transactions;

                   (vi) changes in key managerial personnel."

16. The 'note' appended to Regulation 2(1)(n) of PIT

                   Regulations is relevant and it reads as follows:

                   "NOTE: It is intended that information relating to a company or securities, that is not generally available would be unpublished price sensitive information if it is likely to materially affect the price upon coming into the public domain. The types of matters that would ordinarily give rise to unpublished price sensitive information have been listed above to give illustrative guidance of unpublished price sensitive information."

17. A combined reading of the Regulations extracted above lead to an irresistible inference that the information that the Company was going to announce huge profit in the ensuing financial result was not 'generally available information', which was accessible to the public on a non-discriminatory basis. Admitted position is, Nitin was an employee with the Company. In his statement recorded by the SEBI, he has admitted that he knew that it was commonly discussed in the office that the Company was going to declare huge profits in the next financial results. He has further admitted that in addition to the declaration of profit, he also knew that the Company had increased the AMC for all the customers multifold and he was confident that Company's scrip was going to do well; and therefore, he had asked Anupam to purchase the shares in April and May, 2023. It is relevant and important to note that while replying to a question as to 'why he did not invest by using his own account, he has stated that he did not do so because of fear of being caught'.

18. We have perused the WhatsApp chats and the sale and details of trades tabulated in Table-4 at paragraph 59 of the impugned order. The screenshots of WhatsApp conversation extracted in paragraph 32 of the impugned order match with the transactions shown in Table-4. In any event, as noted hereinabove, appellants have not denied the transactions. Thus, Nitin, an insider in possession of UPSI had communicated it to Anupam and both invested in Company's scrip and made a profit of about ₹8.98 Lakh.

19. The AO has considered the mitigating factors contained in Section 15J of the SEBI Act and imposed a penalty of ₹15 Lakhs on Nitin and ₹10 Lakhs on Anupam. During the hearing, we were informed that Nitin was removed from service. The AO has also recorded that there is no material on record to hold that appellants had repeatedly violated the Securities law. In the circumstances, in our considered view, imposing minimum penalty on Nitin would be just and appropriate.

20. Hence, the following:

                   ORDER

                   i. Appeal No.531 of 2025 is allowed in part.

                   ii. While confirming the findings, the penalty under Section 15G of the SEBI Act, 1992 is reduced to ₹10 Lakhs.

                   iii. Appeal No.532 of 2025 is dismissed.

                        iv. Pending interlocutory application(s), if any, stand disposed of.