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Why an appellate Tribunal has quashed SEBI’s order against Ambani

BusinessWhy an appellate Tribunal has quashed SEBI’s order against Ambani

An appeals tribunal has quashed a 2021 order by the markets regulator against Reliance Industries Ltd (RIL) Chairman and Managing Director Mukesh Ambani and two other entities in a case relating to alleged manipulative trading in the shares of the erstwhile Reliance Petroleum Ltd (RPL).RPL was merged with RIL, the flagship of Mukesh Ambani’s Reliance group, in 2008. The case has been hanging fire for the last 15 years.
Company’s MD is not ipso facto responsible for every alleged contravention of the law by the corporate entities, says bench. What is the 15-year-old RPL case?

RPL was merged with RIL, the flagship of Mukesh Ambani’s Reliance group, in 2008. The case has been hanging fire for the last 15 years.

The RPL case

Before RPL was merged with RIL, the latter company had sold 4.1 per cent of its stake in the former. However, to prevent a fall in the share price of RPL, the equity was alleged to have been sold first in the futures market (in which commodity and futures contracts are bought and sold for delivery in the future), and later in the spot market (cash market in which financial instruments are traded for immediate delivery).

The markets regulator, the Securities and Exchange Board of India (SEBI), served notice saying that the company was aware there would be a sale of shares in the spot market and hence, its sales in the futures market before that amounted to insider trading.

RIL was also prohibited from dealing in equity derivatives in the Futures & Options (F&O) segment of stock exchanges, directly or indirectly, for one year from the date of the order.

In November 2020, the Securities Appellate Tribunal (SAT) upheld SEBI’s disgorgement order. RIL appealed against the SAT order in the Supreme Court. That case is still pending.
In an order dated March 24, 2017, SEBI directed RIL to disgorge an amount of Rs 447.27 crore along with interest calculated at the rate of 12 per cent per annum from November 29, 2007 until the date of payment.

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