RIL moves tribunal against Sebi order on Reliance Petroleum

MUMBAI: Reliance Industries Ltd (RIL) on Monday approached the Securities and Appellate Tribunal (SAT) against an unfavourable order by Securities and Exchange Board of India (Sebi) in the Reliance Petroleum Ltd (RPL) case.

Sebi on March 24 had barred RIL from accessing equity derivatives for a year and directed it to part with profits made by allegedly violating rules on unfair trade practices, when it sold shares in its erstwhile subsidiary RPL back in 2007.

“RIL has moved SAT against the Sebi order passed on March 24. The petition was filed today and the company has sought a hearing on Wednesday,” a person aware of the matter said. An RIL spokesperson confirmed the development.

In its order, Sebi directed RIL to pay ₹447.27 crore plus an annual interest of 12% from November 29, 2007, adding up to around ₹1,300 crore. According to Sebi, the company had indulged in fraudulent and unfair trade practices and made unlawful gains of ₹513 crore.

While the grounds of the RIL petition could not be ascertained, RIL in a statement had earlier said that Sebi had misconstrued the true nature of the transactions and imposed unjustifiable sanctions. Sebi arrived at the unlawful gain of ₹513 crore by considering the net short position that RIL and 12 other related entities maintained while trading in the RPL stock in November 2007, ahead of a planned amalgamation of the firm with RIL.

In 2007, RIL sold a 4.1% stake in RPL, but to prevent a slump in the RPL stock, the shares were sold first in the futures market and later in the spot market, covering the share sales in the futures market.

RIL and the other entities were allegedly involved in the short sale of RPL shares ahead of the amalgamation.

A short sale involves selling borrowed shares and buying them back later at a lower price.

The regulator termed these transactions as manipulative but RIL claimed this was a hedging strategy.

In 2008, the regulator launched investigations into the matter and initiated quasi-judicial proceedings in 2010. The same year, RIL applied to settle the case through the consent mechanism, but Sebi rejected the application in 2012.

RIL then filed an appeal before SAT challenging the order. SAT presiding officer JP Devadhar on June 30, 2014 rejected the appeal as it was not “consentable and maintainable”. Sebi completed investigation in 2015 and subsequently issued a show cause notice to RIL.