‘Insider trading’ case: SEBI bars Reliance Industries Ltd from equity derivatives market for a year

The Securities and Exchange Board of India (Sebi) late on Friday barred Mukesh Ambani-led Reliance Industries Limited (RIL) from accessing the equity derivatives segment for a year and has told the company to disgorge Rs 447.270000000 along with an interest of 12% since November 29, 2007, in a ten year old insider trading case involving its erstwhile arm Reliance Petroleum Limited (RPL). The total penalty of RIL after adding interest comes close to Rs 1,3000000000. A spokesperson of RIL said the company will file an appeal against the Sebi order in the Securities Appellate Tribunal (SAT). The Sebi order passed by whole time member G Mahalingam has directed the company to disgorge the “unlawful gains” made by it within 45 days of the order. According to the Sebi order, RIL has made “unlawful gains of Rs 5130000000” by adopting “fraudulent and manipulative strategy/pattern”. “In my view, there is a fraudulent scheme carried out by Noticee No.1 (RIL) through the 12 connected persons/ front entities with the intention of making profits on account of the legally impermissible limits held by it clandestinely and lowering the price in the cash market,” said Mahalingam’s order. “Throughout its written and oral submissions, Noticee No. 1 has referred to its actions as ‘hedging’ to justify its elaborate scheme. The strategy of ‘hedging’, put forward as a defence by Noticee No.1 is nothing but a mirage,” said the order. The case pertaining to RIL dates back to 2008, when Sebi alleged that the oil-to-yarn and retail major violated some of its norms a when it merged its subsidiary RPL with itself in 2007. RIL, prior to the merger of RPL with itself, allegedly short-sold a 4.1% stake in RPL valued at Rs 4,0230000000 to prevent a slump in the stock. The RPL shares were first sold in the futures market and later in the spot market, covering the sales in the futures market, it was alleged. RIL has asked for a consent settlement order previously but Sebi had rejected its plea. In 2014, RIL’s appeal in the SAT against Sebi’s refusal to agree to a consent order was also not successful. Subsequently, Sebi continued the investigation of its case and RIL and 12 other entitites presented their defence in January this year. “The trades in RPL shares which were examined by Sebi were genuine and bona fide transactions. These were carried out keeping the best interest of the company and its shareholders, in view. Sebi appears to have misconstrued the true nature of the transactions and imposed unjustifiable sanctions. We are in the process of consulting our legal advisors. We propose to prefer an appeal and challenge the order in Securities Appellate Tribunal. We remain confident of fully justifying the veracity of the transactions and vindicating our stand,” the RIL spokesperson said.