The Supreme Court of India on Friday set aside the findings of the Securities and Exchange Board of India that had accused Reliance Industries Limited of fraud and market manipulation in trading the futures of Reliance Petroleum Limited for unlawful gains.
The court also set aside Sebi’s March 24, 2017 order, which had earlier been upheld by the Securities Appellate Tribunal in November 2020.
A bench comprising Justices J B Pardiwala and R Mahadevan set aside Sebi’s direction asking RIL to disgorge ₹447.27 crore along with 12 per cent annual simple interest, Indian Express reported.
The bench stated that the SAT majority judgment had committed a serious error in affirming allegations of fraud under Regulations 3 and 4 of the Sebi Prohibition of Fraudulent and Unfair Trade Practices Regulations.
The Supreme Court also directed that the ₹250 crore deposited by RIL during the pendency of the proceedings be refunded. However, it upheld a separate penalty of ₹25 crore imposed on the company for alleged violations related to disclosure requirements under a 2001 Sebi circular concerning position limits.
The dispute stemmed from RIL’s March 2007 decision to raise ₹87,000 crore for various projects through the sale of shares in its listed subsidiary RPL. The company had decided to sell around 5 per cent of its RPL stake, amounting to nearly 22.5 crore shares, reportedly on the basis that the shares were overvalued.
Between November 6 and November 29, 2007, RIL sold 20.29 crore RPL shares in the cash segments of the NSE and BSE. Reports noted that 2.25 crore shares were sold during the final 10 minutes of trading on November 29.
Through these transactions, RIL reportedly earned about ₹4,500 crore from cash market sales and another ₹513 crore from futures trading conducted through 12 agents, taking the total gains to approximately ₹5,013 crore.
Sebi had later concluded that RIL acted fraudulently by allegedly using 12 agents to hold separate positions within open interest limits on its behalf and by cornering 93.63 per cent of RPL’s November futures contracts. According to the regulator, the trading strategy adopted by the company in November 2007, particularly on the futures expiry day, manipulated settlement prices during the last half hour of trading, thereby violating provisions of the Sebi Act and PFUTP Regulations.
When the matter was challenged earlier, the Securities Appellate Tribunal had reportedly found no fault with Sebi’s conclusions and upheld the regulator’s order.