BackRIL-Sebi insider trading case: SAT to announce verdict on 30 June
The dispute relates to alleged insider trading ahead of a merger between Reliance Petroleum and RIL in 2007
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Mumbai: The Securities Appellate Tribunal (SAT) will pronounce its order on a more than six-year old case between Reliance Industries Ltd (RIL) and the Securities and Exchange Board of India (Sebi) on 30 June.
The dispute relates to alleged insider trading ahead of a merger between Reliance Petroleum Ltd (RPL) and RIL in 2007.
The tribunal is hearing RIL’s appeal challenging Sebi’s decision to take the case out of the consent process, which allows companies and individuals to settle disputes by paying a sum of money without admission or denial of wrongdoing.
At a hearing on Thursday, Sebi clarified to the court that its new consent norms will apply to the dispute with RIL over alleged insider trading, if SAT sends the case back to the regulator for settlement.
Darius Khambata, senior counsel representing Sebi, said, “SAT should decide the case. Even if the case is remanded back to Sebi, it will come under the new consent norms as RIL’s consent application was rejected earlier."
According to Khambata, under the new norms, this case cannot be settled as it relates to “serious fraudulent and unfair trade practice" by RIL.
Janak Dwarkadas, senior counsel representing RIL, said, “...they (Sebi) have not followed the rule of law while rejecting our case earlier".
SAT, which decides on appeals against the capital market regulator, had asked Sebi and RIL to file a clarification on the impact of the new consent settlement norms on the dispute with RIL.
Sebi in May 2012 tightened consent norms by excluding serious offences such as insider trading, violations of listing disclosures and illegal pooling of money from the settlement process. The new norms are retrospective, applying to all cases from 20 April 2007. The regulation also requires an entity to file for consent within 60 days of receiving a Sebi show-cause notice.
The case relates to RPL’s merger with RIL through a process that involved the alleged short sale of shares in RPL by entities related to RIL ahead of the union. A short sale occurs when borrowed shares are sold with the intention of buying them back later at a lower price.
In 2007, RIL sold a 4.1% stake in RPL, but to prevent a slump in the latter’s stock, the shares were sold first in the futures market and later in the spot market, covering the share sales in the futures market. In 2008, Sebi started an investigation into the matter and in 2010 initiated quasi-judicial proceedings. Sebi’s claim is that because the company was aware of the sale of equity shares and sold futures ahead of that, its actions amounted to fraudulent and unfair trade practice. Through the dealings, RIL received revenue of ₹ 4,023 crore and its profit from the transaction in the futures segment was ₹ 513 crore. RIL challenged a show-cause notice issued by Sebi in December 2010.
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