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Home >Companies >News >Tribunal rejects Reliance’s appeal against Sebi order

The Securities Appellate Tribunal (SAT) on Thursday upheld an order by the markets regulator directing Reliance Industries Ltd (RIL) to pay 447 crore, along with 12% annual interest, for making alleged unlawful gains in securities trading, dismissing an appeal by India’s most valuable company.

The appellate tribunal dismissed RIL’s appeal against the Securities and Exchange Board of India (Sebi) order by a 2:1 majority order.

The 24 March 2017 Sebi order pertained to trading in the securities of Reliance Petroleum Ltd (RPL), a unit of RIL, in November 2007.

RPL was merged with the parent in 2009. The Sebi order also banned RIL and 12 of its promoter group entities from equity derivatives trading for a year.

In a statement, RIL said it will challenge the dismissal of its plea by the appellate tribunal in the Supreme Court, adding that the company is confident that its position will be vindicated in the Supreme Court.

“All trades carried out by the company were genuine and bona fide. No irregularity can be attached to these transactions," RIL said in the statement, adding that it has not violated any law or regulation while selling shares of RPL in November 2007.

In March 2007, RIL sold 4.1% of its stake in RPL. However, to prevent a plunge in the RPL share price, the shares were sold first in the futures market followed by the spot market, covering the share sales in the futures market. The 2017 order passed by Sebi said RIL had made “unlawful gains" of 513 crore, “which could not have been made but for the fraudulent and manipulative strategy/pattern adopted by them".

Sebi arrived at an unlawful gain of 513 crore by considering the net short position that RIL and 12 other entities maintained while trading in the RPL stock in November 2007.

In 2008, Sebi launched an investigation into the matter and initiated quasi-judicial proceedings in 2010. That year, RIL applied to settle the case through consent mechanism. Sebi, however, rejected the application in 2012.

RIL then filed an appeal before SAT, challenging the order. SAT in June 2014 said the dispute was rejected as it was not “consentable and maintainable".

Sebi completed investigation in the matter in 2015 and subsequently issued a show-cause notice to RIL.

In addition to barring RIL and 12 of its promoter group entities from dealing in equity derivatives trading, Sebi also directed the company to disgorge 447 crore, along with an annual interest of 12% since 29 November 2007, taking the total disgorgement amount to over 1,300 crore.

SAT gave a divided verdict. Presiding member justice Tarun Agarwala ruled that the Sebi order should be set aside as it did not make a case for fraud.

“The element of fraud has to be established which in the instant case the respondent has miserably failed," Agrawala said.

The other two members held RIL hoisted a scheme to manipulate the market. “It is undoubtedly a pre-planned strategy of manipulation, with all actions done by a single entity, RIL, and hoisted upon an unsuspecting market," said C.K.G. Nair and Justice M.T. Joshi, members, SAT.

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