The appellate tribunal has overturned a Rs15 crore penalty imposed by the markets regulator on the Reliance Industries managing director in a case related to alleged manipulative trades in shares of the erstwhile Reliance Petroleum. Sebi, however, dismissed RIL’s plea in the case
Mumbai: The Securities Appellate Tribunal (SAT) has reportedly canceled the order of the market regulator SEBI (Securities and Exchange Board of India) against Reliance Industries Limited (RIL), its Chairman Mukesh Ambani, Navi Mumbai Special Economic Zone (SEZ), and Mumbai SEZ related to alleged manipulative trading. The order from SEBI in 2021 has been revoked.
In January 2021, the Securities and Exchange Board of India (SEBI) imposed fines of ₹25 crore on RIL and ₹15 crore on Mukesh Ambani in connection with the case. It also directed Navi Mumbai SEZ to pay a fine of ₹20 crore. Ambani had challenged the order before SAT along with RIL and other entities.
On Monday, the SAT bench led by Justice Tarun Agarwal stated that SEBI’s order against Ambani, Navi Mumbai SEZ, and Mumbai SEZ has been canceled. It also instructed the regulator to refund any fines already paid if applicable.
However, the Tribunal rejected Reliance’s appeal in the case. In essence, this means that SEBI’s order against RIL, including the imposed fines, will still stand.
This case pertains to the sale and purchase of shares of Reliance Petroleum in cash and futures segments in November 2007. Following this, RIL had decided to sell approximately 5% stake in Reliance Petroleum, a listed subsidiary that was later merged with RIL in 2009.
SEBI’s adjudicating officer B.J. Dilip had stated that “common investors were not aware that behind the dealings in the cash and F&O (futures and options) segments, it was RIL.” He further mentioned that the fraudulent practices affected the prices of RIL securities in both cash and F&O segments, causing losses to other investors.
SEBI had also stated in its order that RIL was involved in a sham trading plan related to the sale of RIL’s 5% stake in Reliance Petroleum. It was mentioned that before entering into the sale transaction in the cash segment, RIL, through 12 agents, had created a large short position in the November futures, and a settlement was reached with them to limit the exposure for commission payment.
SEBI had noted in its order that as a result of the manipulation, RIL had captured nearly 93% of the open interest in November futures in fraudulent dealings with agents in the F&O segment. It was stated that funding for margin payments to agents was provided by Navi Mumbai SEZ and Mumbai SEZ.
On Monday, the SAT bench mentioned that it was not possible to know for Navi Mumbai SEZ and Mumbai SEZ that RIL would sell shares in the cash segment in November 2007 and RIL would take a position in the futures segment through its agents, as alleged by SEBI in 2021.
In its order, SEBI had said that an individual connected to RIL had placed orders in the cash segment on behalf of RIL and in the F&O segment on behalf of agents.
Regarding the dismissal of RIL’s appeal in the case, Ravishankar Pandey, Head of Securities and Capital Markets Practice at law firm MD&P Partners, said, “Since the company was appealing in the Supreme Court against the SAT’s 2020 order, leaving aside the quantum of the penalty, its recent appeal was known.”
The order under challenge was passed by the adjudicating officer of SEBI. On the same investigation, the full-time members of SEBI passed an order, which the Tribunal upheld in its order on November 5, 2020, with a majority of 2:1,” he said.
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