SAT quashes Sebi order against Mukesh Ambani, Navi Mumbai SEZ; no relief for RIL | Mint
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Business News/ News / SAT quashes Sebi order against Mukesh Ambani, Navi Mumbai SEZ; no relief for RIL
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SAT quashes Sebi order against Mukesh Ambani, Navi Mumbai SEZ; no relief for RIL

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

Reliance Industries managing director Mukesh Ambani along with RIL and other entities had challenged Sebi's 2021 before the Securities Appellate Tribunal. (Reuters)Premium
Reliance Industries managing director Mukesh Ambani along with RIL and other entities had challenged Sebi's 2021 before the Securities Appellate Tribunal. (Reuters)

MUMBAI : The Securities Appellate Tribunal (SAT) has quashed the markets regulator’s 2021 order against Reliance Industries Ltd (RIL) managing director Mukesh Ambani, the Navi Mumbai Special Economic Zone (SEZ) and the Mumbai SEZ in a case related to alleged manipulative trades in shares of the erstwhile Reliance Petroleum Ltd.

In January 2021, the Securities and Exchange Board of India (Sebi) imposed a penalty of 25 crore on RIL and 15 crore on Ambani. It had also asked the Navi Mumbai SEZ to pay a penalty of 20 crore. Ambani along with RIL and other entities had challenged the order before the SAT.

On Monday, a SAT bench led by Justice Tarun Agarwala held that Sebi’s order against Ambani, the Navi Mumbai SEZ and the Mumbai SEZ stood quashed. It also directed the regulator to refund any penalty if already deposited.

The tribunal, however, dismissed Reliance’s appeal in the case. In essence, this means the Sebi order on RIL stands operational, including the penalty levied on the company.

The case pertains to the sale and purchase of Reliance Petroleum shares in the cash and futures segments in November 2007. Subsequently, RIL decided to sell a nearly 5% stake in Reliance Petroleum, a listed subsidiary that was later merged with RIL in 2009.

Sebi adjudicating officer B.J. Dilip had held that “general investors were not aware that the entity behind the above (futures and options) segment transactions was RIL. The execution of the...fraudulent trades affected the price of the RPL securities in both cash and F&O (futures and options) segments and harmed the interests of other investors".

Sebi, in its order, had also stated that RIL had engaged in a scheme of manipulative trading in respect of the sale of RIL’s 5% stake in Reliance Petroleum . It had said that RIL, before undertaking sale transactions in the cash segment, had booked large short positions in Reliance Petroleum November futures through 12 agents with whom it had entered into an agreement to circumvent position limits for a commission payment.

As a result, RIL fraudulently cornered nearly 93% of open interest in Reliance Petroleum November futures, when the agents took short positions in the F&O segment on its behalf, Sebi had said in its order. The funding for the margin payments by the agents was provided by the Navi Mumbai SEZ and the Mumbai SEZ, it had said.

On Monday, the SAT bench said it was not possible for the Navi Mumbai SEZ and Mumbai SEZ to have known that RIL would sell shares in the cash segment in November 2007, and that RIL would take positions in the futures segment through its agents, as alleged by one of Sebi’s whole-time members in 2021.

Sebi in its order had said a common person connected with RIL had placed orders in the cash segment on behalf of RIL and in the F&O segment on behalf of the agents.

As for the SAT dismissing RIL’s appeal in the case, Ravishekhar Pandey, practice head, securities and capital market, at law firm MDP & Partners, explained that as the company was in appeal before the Supreme Court against a 2020 order of the SAT, “the fate of its recent appeal was known, except for adjudication on the quantum of penalty".

“The order under challenge was passed by the adjudicating officer of Sebi. On the same investigation, the whole-time member of Sebi had passed an order which was upheld by the tribunal vide its order dated 5 November 2020 (with a 2:1 majority)," he added.

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ABOUT THE AUTHOR
Priyanka Gawande
Priyanka Gawande is a senior legal correspondent at Mint. She has worked as legal reporter for four years with both television and digital mediums. Based in Mumbai, she reports on disputes across sectors including banking, corporates and finance. This also includes insolvency and bankruptcy cases and intellectual property rights (IPR) litigation. Her focus also comprises tracking capital markets and disputes relating to securities law. Previously, Priyanka worked with Informist Media for 2.5 years covering major insolvency and bankruptcy cases and corporate developments. She started her career in journalism with Business Television India (BTVi) where she reported on primary markets, banking, finance and insurance companies.
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Published: 04 Dec 2023, 01:04 PM IST
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