Insider trading regulation in India operates at the intersection of market integrity, investor confidence, and regulatory vigilance. With capital markets becoming increasingly digitised, the nature of insider trading investigations has undergone a profound transformation. Trades no longer rely on overt exchanges of information through physical meetings or recorded telephone conversations. Instead, sensitive corporate information travels silently through encrypted messaging platforms, cloud-based applications, and transient digital interfaces. Every interaction leaves behind a digital footprint, yet converting such footprints into legally sustainable evidence presents formidable challenges for regulators.

The Securities and Exchange Board of India functions as the principal market regulator entrusted with enforcing insider trading norms under the SEBI Prohibition of Insider Trading Regulations 2015. The Securities Appellate Tribunal exercises appellate jurisdiction over enforcement actions. Both institutions now confront evidentiary dilemmas rooted in technology-driven communication. This article examines how digital footprints influence insider trading enforcement, the evidentiary thresholds applied by SEBI and SAT, and the judicial principles evolved by the Supreme Court of India while interpreting insider trading provisions.

Insider trading regulation in India rests primarily upon the SEBI Prohibition of Insider Trading Regulations 2015. An insider includes any connected person or any person in possession of unpublished price-sensitive information. Unpublished price-sensitive information refers to information relating to a company or its securities that remains unpublished and which, upon becoming public, materially affects the price of securities.

SEBI enforcement requires proof of three essential elements. First, access or possession of unpublished price-sensitive information. Second, trading while in possession of such information. Third, a causal link between possession and trading conduct. In contemporary investigations, establishing these elements increasingly depends upon analysis of digital artefacts rather than direct testimonial evidence.

Digital footprints encompass metadata, messaging logs, cloud backups, location records, and transactional timestamps generated through everyday use of technology. Corporate insiders routinely communicate through platforms such as WhatsApp, Signal, Telegram, or email servers hosted outside Indian jurisdiction. Many platforms employ end-to-end encryption, leaving regulators dependent upon circumstantial indicators rather than direct message content.

Information dissemination now occurs through informal channels. Market-sensitive discussions may unfold within private groups, vanish through auto-delete features, or migrate across devices. Trading decisions may follow swiftly, leaving regulators to infer misuse through patterns rather than explicit proof.

SEBI proceedings remain civil in nature. The standard of proof remains preponderance of probabilities rather than proof beyond a reasonable doubt. This principle stands firmly established by the Supreme Court.

In SEBI v. Kanaiyalal Baldevbhai Patel, the Supreme Court clarified the scope of insider trading enforcement. The Court examined whether mere possession of unpublished price-sensitive information suffices or whether actual use requires proof. The judgment recognised the difficulty of obtaining direct evidence in insider trading cases and accepted circumstantial material, including trading patterns, timing proximity, and access relationships.

The Court observed that regulatory objectives would suffer if enforcement depended solely upon direct evidence. Inferences drawn from conduct, surrounding circumstances, and probability assessments remain legally permissible.

This principle assumes heightened importance in digital investigations where deleted communications or encrypted platforms restrict evidentiary access.

Digital investigations frequently rely upon correlational analysis. SEBI examines unusual trading volumes, synchronised transactions, or consistent profits preceding corporate announcements. Communication logs may indicate interaction between insiders and traders even where content remains unavailable.

The Supreme Court recognised the legitimacy of such evidentiary reasoning in SEBI v. Abhijit Rajan, The Court analysed the timing of trades vis-à-vis access to sensitive information. It upheld SEBI findings based on circumstantial proof establishing knowledge and misuse of unpublished information.

This approach permits regulators to bridge evidentiary gaps created by digital secrecy while remaining anchored in legal reasoning.

A recurring defence in insider trading cases involves denial of intent. Digital footprints often lack express acknowledgment of wrongful purpose. Indian securities jurisprudence decisively rejects intent as a mandatory ingredient for civil liability.

In SEBI v. Shri Ram Mutual Fund, the Supreme Court held that mens rea does not constitute an essential element for imposing penalties under SEBI regulations. Once a contravention stands established, intention becomes immaterial.

This ruling carries direct relevance for digital era investigations. Even in the absence of proof of deliberate misuse through explicit messages, liability may arise from objective conduct inferred through electronic records.

Indian jurisprudence previously engaged in debate surrounding possession versus use of unpublished price-sensitive information. Digital footprints intensify this debate since possession often leaves limited visible traces.

The Supreme Court in Rakesh Agrawal v. SEBI, addressed this issue with nuance. The Court acknowledged circumstances where possession exists without wrongful use. It examined whether transactions occurred for legitimate corporate purposes rather than personal gain.

Although this defence remains fact-specific, digital investigations require careful examination of context, corporate role, timing, and purpose. Automated inference without contextual analysis risks legal infirmity.

SEBI enjoys wide investigative authority under the SEBI Act 1992. These powers include summoning records, examining electronic data, and accessing trading information. However, cross-border data storage, privacy regulations, and encryption protocols limit investigative reach.

The Supreme Court in SEBI v. Cabot International Capital Corporation, affirmed SEBI's authority to act decisively in market interest while relying upon technical and inferential material. Although this case concerned market manipulation, its reasoning applies equally to insider trading enforcement.

Digital footprints often operate as fragments rather than complete narratives. SEBI combines fragments through forensic analysis, behavioural modelling, and probability assessment.

The Securities Appellate Tribunal functions as a judicial filter safeguarding procedural fairness. SAT frequently examines whether SEBI findings rest upon rational inference rather than conjecture. Digital evidence undergoes strict scrutiny regarding chain of custody, relevance, and probative value.

SAT decisions often emphasise proportionality and evidentiary coherence. While accepting circumstantial proof, the Tribunal remains cautious of speculative assumptions drawn solely from market movements without corroborative digital indicators.

Digital evidence raises issues concerning authenticity, tampering, and reliability. Electronic records require compliance with evidentiary standards under the Information Technology Act 2000 and principles governing electronic evidence.

Data sourced from third-party platforms demands validation. Screenshots, call logs, or metadata require forensic verification. Absence of original servers or device-level extraction weakens evidentiary strength.

Encrypted communications further complicate attribution. The mere existence of contact between parties does not conclusively establish transmission of unpublished price-sensitive information.

Insider trading enforcement seeks to preserve market fairness. However, aggressive inference without evidentiary discipline risks regulatory overreach. Courts consistently emphasise a balance between investor protection and procedural justice.

Digital footprints enhance investigative capability yet demand judicial restraint. Algorithms, data analytics, and behavioural patterns assist regulators but cannot replace legal reasoning.

The Supreme Court jurisprudence encourages contextual evaluation rather than mechanical application of presumptions.

Insider trading enforcement in the age of digital footprints presents unprecedented legal complexity. Technology enables the silent dissemination of sensitive information while simultaneously generating trails capable of regulatory scrutiny. SEBI and SAT operate within evolving jurisprudence, recognising circumstantial evidence, probability-based inference, and civil liability standards.

As digital communication continues evolving, regulatory institutions must refine forensic capability while courts ensure principled adjudication. Insider trading law remains dynamic, adapting continuously to technological realities without compromising foundational legal safeguards.

About the authors: Divyang Chandan is a Partner and the Head of Rent Control and IP practice at Chandan & Chandan.

Siddhima Kotak is an Advocate practicing before the Bombay High Court.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

If you would like your Deals, Columns, Press Releases to be published on Bar & Bench, please fill in the form available here.