Mumbai: The Securities and Exchange Board of India (Sebi) has rejected Reliance Industries Ltd’s (RIL’s) consent plea in the alleged insider trading case in the shares of the erstwhile Reliance Petroleum Ltd (RPL), according to a Sebi note posted on the market regulator’s website late Thursday evening.
This is the third instance of RIL’s consent plea being rejected.
The Sebi note disclosed names of 149 entities whose consent applications were rejected between 26 May and 31 December 2012.
The list included RIL and suggested that the consent applications of 12 more entities were also rejected in the same insider trading case of RPL.
A consent process is one in which the individual or entity being investigated pays a fee and the regulator drops the case and also all charges of wrongdoing. This refers to a settlement of a case dealing with alleged infractions in securities laws without the individual or company involved neither admitting nor denying guilt.
RIL declined to comment.
Apart from RIL, Reliance Ports and Terminals Ltd, LPG Infrastructure (India) Ltd, Vinamra Universal Traders Pvt. Ltd, Gujarat Petcoke and Petroproducts Supply Pvt. Ltd , Relogistics (Rajasthan) Pvt. Ltd, Relogistics (India) Pvt. Ltd, Relpol Plastic Products Pvt. Ltd, Darshan Securities Pvt. Ltd, Fine Tech Commercials Pvt. Ltd, Dharti Investment and Holdings Ltd, Aarthik Commercials Pvt. Ltd and Mo Tech Software Pvt. Ltd feature in the list of companies that had consent applications rejected. They all relate to the same case.
The Sebi note said these entities allegedly violated certain norms on prohibition of fraudulent and unfair trade practices.
Separately, consent pleas filed by RIL senior executive and close Mukesh Ambani aide Manoj H. Modi, along with some other entities, in a case of alleged insider trading involving Indian Petrochemical Corp. Ltd (a company that RIL had acquired) was also rejected by the stock market regulator.
The alleged insider trading in shares of RPL took place in 2007 during the merger of RPL with RIL and involved the short sale of shares in the former by entities related to the latter ahead of that amalgamation. A short sale involves selling borrowed shares with plans to buy them back later at a lower price.
The regulator had, in 2008, launched investigations into the matter and initiated quasi-judicial proceedings in 2010.
In 2007, RIL sold 4.1% of its stake in RPL, but to prevent a slump in the RPL stock, the shares were sold first in the futures market and later in the spot market, covering the share sales in the futures market.
Sebi’s claim is that because the company was aware of the sale of equity shares and sold futures ahead of that, its actions amount to insider trading. Through the dealings, RIL received revenue of Rs.4,023 crore and its profit from the transaction in the futures segment was Rs.513 crore.
RIL and the market regulator have been trying to settle the case through the so-called consent process for quite some time now. This is the third consent application of RIL in the matter that has been rejected by Sebi. Previously, it was reported that RIL had approached Sebi to settle the case, first offering to pay about Rs.2 crore and later Rs.10 crore.