Sebi Imposed Penalties on RIL for Reliance Petroleum Case

Sebi Imposed Penalties on RIL for Reliance Petroleum Case

By: Ashwathy Nair

• The case would affect the sale and purchase of RPL shares in futures segments.
• The interest of other investors is harmed by the execution of the fraudulent trades.
• Prohibition on RIL from dealing in equity derivatives in the F&O segment of the stock exchange.

On Friday, a penalty totalling ₹70 crores was imposed by the Securities and Exchange Board of India (Sebi) on Reliance Industries Ltd. (RIL). The chairman and managing director of RIL, Mukesh Ambani along with two other entities were alleged with manipulative trading in the shares of erstwhile Reliance Petroleum Ltd (RPL).

The market regulator has charged fines of Rs 25 crore and Rs 15 crore respectively on Reliance Industries Ltd. and Ambani. Besides, Navi Mumbai SEZ Pvt Ltd has been ordered to pay Rs 20 crore and Rs 10 crore to be paid by Mumbai SEZ Ltd.

The Adjudicating Officer of Sebi, B J Dilip stated in a 95-page order that “When deciding the amount of penalty, I find it appropriate to consider the direction like debarment and as a relevant factor, the disgorgement that has already been passed against RIL.”

Any manipulation in the volume or price of securities has always eroded the confidence of investor in the market when they find themselves at the receiving end of market manipulators.

The order further stated that “In the present case, the general investors were unaware that RIL was the company behind the above-mentioned F&O segment transactions. In both the cash and F&O divisions, the execution of the aforementioned fraudulent trades affected the price of the RPL securities and damaged the interests of other investors.”

Highest standards of professionalism, transparency and good practices of corporate governance were responsible for the manipulative activities of Reliance Industries Ltd., which inspires confidence of the investors that are dealing in the capital markets. Any attempt diverging from such standards will not only wear away the confidence of the investors but it will also be affecting the integrity of the markets.

For the past 13 years, the case of Reliance Petroleum has been hanging on fire. 4.1 per cent of its interest in RPL was sold by RIL. However, the equity was evidently sold, first in the futures market and then in the spot market in order to avoid a decline in the RPL share price. The crux of the Sebi notice is that the company realized that there would be a sale of shares on the cash market and that, its transactions on the futures market would also be insider trading before that. In the year 2008, RPL got merged with RIL.