Bombay HC clears way for SEBI to adjudicate against RIL

Case pertains to fraudulent trading in erstwhile RPL shares A recent order by the Bombay High Court has paved the way for the Securities and Exchange Board of India (SEBI) to re-start adjudication proceedings against Reliance Industries Limited (RIL) in a matter wherein it was alleged that the company made unlawful gains of nearly Rs. 5000000000 in 2007 through fraudulent trading in the shares of the erstwhile Reliance Petroleum (RPL). Consent route Earlier this month, the high court dismissed a petition by RIL that effectively put an end to the company’s attempts to settle the matter through the consent route. The company had moved the high court to get access to an internal SEBI report prepared by Y.H. Malegam, based on which the matter was being pursued at SEBI. “As and when the adjudicatory proceedings take place, the petitioner [RIL] may ask for copies of such documents in accordance with the procedure established to conduct the proceedings,” a Bench comprising Chief Justice N.H. Patil and N.M. Jamdar said in the order, rejecting the petition. The order assumes significance as the company, which was facing adjudication proceedings by SEBI, filed for consent based on which the adjudication process was held in abeyance. While the matter was under investigation, SEBI had asked Mr. Malegam, a well-known chartered accountant, to prepare a report on the alleged irregularities at RIL under probe and submit it to the internal committee based on which the regulator could levy a monetary penalty on the listed entity. While RIL wanted access to the report, SEBI declined it on the ground that it was an internal report. RIL, thereafter, moved the high court challenging SEBI’s refusal. According to RIL, the report would would have helped it “formulate its stand during the negotiation proceedings/settlement proceedings.” Incidentally, SEBI had already passed a disgorgement order against RIL in March 2017, wherein the company was ordered to disgorge nearly Rs. 1,0000000000. SEBI had said that RIL had to disgorge Rs. 447.270000000 along with interest at 12% per annum from November 29, 2007, till the date of payment. “Increasingly, internal committee for settlement is taking trial-ready posture, and reaching the settlement terms by the rule book. There is no sign of let-up for even minor infractions, or low-level, even non-fraud, securities law violations,” Sumit Agrawal, founder, RegStreet Law Advisors, said. The case dates back to March 2007, when RIL decided to raise resources by selling about 5% of its holdings in RPL. While RIL was dealing in the shares of RPL in the cash segment, it enlisted 12 entities as agents to operate on its behalf in the derivatives segment.