Shruti Vora v. SEBI (2021): forwarded WhatsApp results are UPSI only if the sender knew

When near-final financial figures for a clutch of listed companies began surfacing on WhatsApp groups a day or two before the companies formally announced their results, SEBI saw a leak. It penalised several market participants who had forwarded those messages, treating the act of circulation as a breach of the insider-trading framework. The Securities Appellate Tribunal disagreed. In a set of connected appeals led by Shruti Vora v. SEBI, decided on 22 March 2021, the Tribunal set aside the penalties, holding that SEBI had not discharged its burden of showing that the forwarders knew the messages carried unpublished price sensitive information.

The facts in brief

SEBI's investigation arose from media reports that financial information about companies including Wipro, Bata India, Mindtree, Ambuja Cements and others had circulated on private WhatsApp groups shortly before the in-house finalisation of those companies' results and ahead of the official disclosures to the stock exchanges. The numbers that appeared in the messages were, in several instances, closely matched by the figures the companies later announced.

Shruti Vora and the other appellants were among the participants who had received and forwarded such messages within these groups. The messages were typically passed on "as received" — a forwarded figure or note, without any indication of where it originated. The adjudicating officer of SEBI concluded that the proximity in time between the messages and the official results, combined with the similarity between the circulated figures and the actual numbers, established that what had been forwarded was unpublished price sensitive information (UPSI), and imposed monetary penalties on the appellants.

The question

The appeals turned on a single, sharply framed issue: whether a "forwarded as received" WhatsApp message containing financial figures, circulating shortly after a company's results were finalised internally but before they were published, amounts to UPSI under the SEBI (Prohibition of Insider Trading) Regulations, 2015 — and, critically, whether the person forwarding it can be penalised without proof that they knew the information was unpublished and price sensitive.

What the Tribunal held

The Tribunal began with the definitional architecture of Regulation 2(1)(n), which describes UPSI as information not generally available that is likely to materially affect the price of securities. Information that is generally available, it noted, cannot be UPSI. From there it located the missing ingredient in SEBI's case — the mental element of the person doing the forwarding.

Knowledge, the Tribunal accepted, is a state of mind that can be proved on a preponderance of probabilities through attendant circumstances. But in these cases it found no such circumstances. The adjudicating officer had relied on only two factors — proximity of time and similarity between the circulated and announced figures — to brand the messages as UPSI and to attribute knowledge to the forwarders. Drawing on its own earlier decision in Samir Arora v. SEBI, the Tribunal reiterated that SEBI cannot dispense with establishing a link between the potential source of the information and the person alleged to be in possession of it.

On the burden of proof, the Tribunal was unambiguous. SEBI had failed to prove, on a preponderance of probabilities, that the impugned messages were unpublished price sensitive information, that the appellants knew the information was unpublished and price sensitive, and that, with that knowledge, they passed it on to others. The Tribunal also addressed the scope of Regulation 3, which prohibits the communication of UPSI otherwise than for legitimate purposes: even accepting that mere passing on of UPSI — without any trading — can attract the prohibition, the regulation still requires the information to qualify as UPSI and the communicator to have the requisite knowledge. With those elements unproven, the adjudicating officer's reasoning could not be upheld. All the appeals were allowed and the penalty orders set aside.

Analysis

The decision draws a clean line between possession and culpable circulation. SEBI's theory effectively converted the act of forwarding a market rumour into a sanctionable offence the moment the rumour turned out to be accurate. The Tribunal refused to make accuracy, in hindsight, the test of liability. Proximity and similarity may raise suspicion, but suspicion is not proof; an after-the-fact match between a forwarded figure and a published result does not establish that the forwarder knew, at the time, that the figure was both confidential and price sensitive.

This places the mental element at the centre of communication-based insider-trading charges under the PIT Regulations. It is consistent with the wider securities-law principle that SEBI's quasi-criminal penalty proceedings are governed by the preponderance-of-probabilities standard — a civil standard, but one that still requires SEBI to lead affirmative material rather than rest on inference stacked on inference. The Tribunal's invocation of Samir Arora reinforces a recurring theme: the regulator must connect the dots between a source of UPSI and the person it seeks to penalise, not merely assert that the dots could be connected.

The order's logic also dovetails with the "generally available" exclusion. Information that has already entered general circulation — including, potentially, through wide forwarding on open or semi-open channels — sits outside the UPSI definition altogether, a point the Tribunal would develop further in later WhatsApp-leak matters concerning the same circulation network.

Why it matters

For market participants, the practical significance is large. Financial information moves through informal channels constantly, and a great deal of it is forwarded reflexively, without knowledge of its provenance. Shruti Vora holds that the law does not punish that reflex unless the regulator can prove the forwarder knew the information was confidential and market-moving. The Supreme Court dismissed SEBI's appeal against the order in September 2022, but did so on the facts and expressly left the questions of law open — so the knowledge requirement the Tribunal articulated stands as a persuasive SAT proposition rather than one settled by the Supreme Court.

For SEBI, the order is a discipline on enforcement. It signals that a leak investigation must be built on evidence of the alleged insider's state of knowledge and a demonstrated link to the source, not on the optics of timing and resemblance. The case sits alongside the Tribunal's broader insistence that insider-trading liability — whether for trading or for communication — be proven, element by element, rather than presumed from circumstance.

Related on Valkya

• Future Corporate Resources (Biyani) v. SEBI: when is information "generally available"?
• SEBI v. Kishore Ajmera: the preponderance-of-probabilities standard
• SEBI v. Abhijit Rajan: insider trading and the profit motive
• SEBI v. Rashmi Saluja (Religare): insider trading and disgorgement

Sources

• SAT order dated 22 March 2021, Shruti Vora v. SEBI (official order text)
• finseclaw, "SAT Order in the matter of Shruti Vora v. SEBI"
• Argus Partners, "SAT holds that information can be branded as UPSI only when the person getting the information had knowledge that it was UPSI"