The Supreme Court has set aside an order directing Mukesh Ambani-led Reliance Industries to disgorge Rs 447.27 crore in a case related to the trading of Reliance Petroleum (RPL) shares in 2007, PTI reported.
The apex court partly allowed Reliance Industries’ appeal against a November 2020 order of the Securities Appellate Tribunal (SAT), Mumbai. While the court cancelled the disgorgement order and directed a refund of the Rs 250 crore deposited by Reliance Industries, it upheld SAT’s observations that the company violated disclosure norms related to position limits under a 2001 SEBI circular.
“The appeal partly succeeds and is hereby partly allowed. Accordingly, the order of disgorgement is also set aside,” the apex court said, according to PTI.
SC flags ‘egregious error’ in SAT verdict
The SAT, by a 2:1 majority, had dismissed Reliance Industries’ appeal against SEBI’s March 24, 2017 order relating to the sale of RPL shares in November 2007.
The Supreme Court said the SAT majority committed an “egregious error” in its judgment on the question of fraud under Regulations 3 and 4 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (PFUTP).
“However, we concur with the SAT’s observations in its majority judgment as regards the penalty to be levied on the appellant number 1 (RIL) for violating the disclosure requirements under the 2001 SEBI circular concerning position limits,” a bench of Justices JB Pardiwala and R Mahadevan said in its 136-page verdict.
The bench said it had no option but to set aside the SAT’s November 5, 2020 order on the finding of fraud under the PFUTP Regulations.
SC orders refund of Rs 250 crore to Reliance Industries
The court directed that Reliance Industries be refunded the Rs 250 crore deposited in the Investors’ Protection Fund pursuant to its December 17, 2020 interim order, passed when it admitted the appeal against the SAT ruling.
“As and by way of interim relief, we order and direct that the appellants shall, within a period of four weeks from today, deposit Rs 250 crore in the Investors’ Protection Fund in compliance with the order of the Whole Time Member, subject to the final result of the appeal,” the court had said at the time. Recovery of the balance, including interest, had been pending the appeal.
In its Friday verdict, the bench noted that SAT had dismissed Reliance Industries’ appeal against the SEBI Whole Time Member’s order essentially on the ground that the company made an illegal and undue gain of Rs 447.27 crore by manipulating RPL share prices to profit in the futures segment.
The court noted it is undisputed that RPL was a 75% subsidiary of Reliance Industries in 2007.