BackInsider trading charges: HC wants RIL as party to case on CIC order
Hearing adjourned in case related to merger of Reliance Petroleum with Reliance Industries
Premium(Abhijit Bhatlekar/Mint)
Mumbai/New Delhi: The Bombay high court on Tuesday adjourned the hearing of a petition against the Central Information Commission’s (CIC) order that the capital market regulator disclose all details related to an insider trading case involving Reliance Petroleum Ltd (RPL) in 2007.
The court asked the Securities and Exchange Board of India (Sebi) lawyer to check whether the regulator can disclose file notings related to the consent circular to the Right to Information applicant Arun Kumar Agrawal. The court has also asked parent Reliance Industries Ltd (RIL) to become a party to the case, which has been adjourned to 19 December.
A company spokesperson declined to comment on the matter immediately.
A division bench of D.Y. Chandrachud and A.A. Sayed is hearing the case, while Sebi is being represented by Mumbai-based law firm Law Point.
The court asked Sebi for a status on the investigations into the insider trading case, which relates to the merger of RPL with Reliance Industries and the short-selling of shares in the former by entities related to the latter ahead of that amalgamation.
Sebi’s lawyer said in court that the investigation report of the case had been submitted to a whole-time member of the regulator, and was under evaluation.
The regulator had begun investigating the matter in 2008 and initiated quasi-judicial proceedings in 2010. The case has not been closed by Sebi.
Short-selling involves the sale of borrowed shares with plans to buy them back later at a lower price.
On 21 November, Sebi moved the high court against CIC Satyananda Mishra’s 6 November order, in which he asked the regulator to disclose details of investigations or consent order proceedings in the case, along with the identity of the entities involved in the short sale of RPL’s shares.
Mishra passed his directive on an appeal filed by Agrawal, a Bangalore lawyer.
“How can Sebi settle a case through (a) consent (process) for ₹ 10 crore, where unlawful gains of ₹ 500 crore have been made?" Agrawal said.
Reliance Industries has approached Sebi twice to settle the case, offering to pay ₹ 2 crore in the first instance and ₹ 10 crore in the second instance.
Sebi and Reliance Industries have been trying to settle the case through a so-called consent process, in which the individual or entity being investigated pays a fine and the regulator drops the case and all charges of wrongdoing.
A consent mechanism refers to a settlement of a case dealing with alleged infractions in securities laws without the individual or company involved either admitting or denying guilt.
The Sebi lawyer, however, said that under the guise of the RTI Act, Agrawal was “trying to make a roving enquiry" as he (Agrawal) had asked Sebi “to open up the entire enquiry in the case." He further said that Agrawal had failed to show in his application how the case was of public importance.
In its 21 November petition, Sebi had said that as the order had been passed by Mishra and not CIC as a whole, it was “bad in law" and therefore “null and void and of no effect." Mint reported this on 23 November, along with the rest of the contents of Sebi’s petition.
Reliance Industries sold 4.1% of its stake in Reliance Petroleum in 2007. In order to prevent a slump in the 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 says that as the company was aware of the sale of equity shares and sold futures ahead of that, its actions amount to insider trading.
Reliance Industries got ₹ 4,023 crore from the trades; its profit from the transaction in the futures segment was ₹ 513 crore.
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