SUPREME COURT : In Chintalapati Srinivasa Raju vs. Securities And Exchange Board of India

The expression “reasonably expected” cannot be a mere ipse dixit – there must be material to show that such person can reasonably be so expected to have access to Unpublished Price Sensitive Information.

A reasonable expectation to be in the know of things can only be based on reasonable inferences drawn from foundational facts and the fact that Chintalapati Srinivasa Raju was a co-brother of B. Ramalinga Raju, without more, cannot be stated to be foundational facts from which an inference of reasonably being expected to be in the knowledge of confidential information can be formed.

The mere fact that the appellant promoted two joint venture companies, one of which ultimately merged with SCSL, and the fact that he was a co-brother of B. Ramalinga Raju, without more, cannot be stated to be foundational facts from which an inference of reasonably being expected to be in the knowledge of confidential information can be formed. It was also pointed out that the appellant had no professional or business relationship with his co-brother and had no connection with any of the entities floated by his co-brother. The fact that the appellant was not involved with fraudulent manipulation is clear from the fact that he ceased to be an Executive Director in the year 2000. Fraudulent manipulation began only from 2001 onwards.

Link : https://www.sci.gov.in/supremecourt/2017/30817/30817_2017_Order_14-May-2018.pdf