The Supreme Court on Thursday asked Reliance Industries (RIL) to deposit Rs 250 crore, which is 50% of the disgorged quantity of Rs 447.27 crore, as ordered by the Securities Appellate Tribunal in a case connected to the sale of Reliance Petroleum (RPL) shares by RIL in November 2007.
A Bench led by Justice DY Chandrachud, although admitting RIL’s appeal against the SAT order, stated the enterprise shall deposit Rs 250 crore inside 4 weeks in the Investors’ Protection Fund in compliance with an order of the Securities and Exchange Board of India (Sebi), topic to the final outcome of the appeal. “There shall be a stay on the recovery of the balance, inclusive of interest, pending the appeal,” the apex court stated in its interim order, although noting that RIL had complied with Sebi’s order for debarment from dealing in equity derivatives for 1 year.
While senior counsel Harish Salve appeared for RIL, Attorney General for India KK Venugopal and senior counsel Arvind Datar represented Sebi.
The SAT in a 2:1 majority order had on November 5 dismissed RIL’s appeal against the Sebi’s March 24, 2017, order that claimed fraudulent trading in the futures and choices segment of the securities of RIL’s erstwhile listed subsidiary RPL, which was merged with the former in 2009, in November 2007.
After discovering that RIL violated the Prohibition of Fraudulent and Unfair Trade Practices, producing unlawful gains although promoting its 4.1% stake in RPL, Sebi had banned RIL from equity derivatives trading for a year and had also directed RIL to disgorge Rs 447 crore, along with uncomplicated interest of 12% per annum because November 29, 2007, till payment.
Sebi had discovered that RIL and 12 of its promoter group entities violated provisions of Section 12A of the SEBI Act, 1992, and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the securities market place) Regulations, 2003.
The Sebi order was later upheld by SAT.
In March 2007, RIL sold 4.1% of its stake in RPL. Sebi had stated front entities triggered a sharp fall in Reliance Petroleum shares and profited from brief positions. The market place regulator alleged that the Ambani firm created illegal gains of Rs 60.28 per share on 7.42 crore shares.
The SAT had rejected RIL’s stand that the disgorgement was a punishment/penalty, although powers granted to Sebi below Section 11B of SEBI Act are remedial in nature, as a result no order for disgorgement could have been passed.
“In the Securities Laws (Amendment) Act, 2014, effected from July 18, 2013, it is clearly stated that power of disgorgement, an amount equivalent to the wrongful gain made or loss averted by such contravention was always with Sebi,” SAT had stated, adding that it is an equitable remedy and not a penal action.