The Supreme Court on Friday granted partial relief to Reliance Industries Limited (RIL) by setting aside a direction by the Securities and Exchange Board of India (SEBI) to disgorge ₹447.27 crore in the 2007 Petroleum futures trading case [Reliance Industries Limited Vs SEBI].
A Bench of Justices JB Pardiwala and R Mahadevan also set aside findings of fraud by SEBI against the company.
However, the Court upheld a separate ₹25 crore penalty imposed on RIL.
The Court further directed SEBI to refund ₹250 Crore that Reliance had already deposited.
The case arose from trades in the shares and futures contracts of Reliance Petroleum Limited (RPL) in November 2007.
At the time, RPL was a listed subsidiary of Reliance Industries Limited (RIL), which held about 75% of its shares. RIL decided to sell around 5% of its shareholding in RPL, amounting to nearly 22.5 crore shares.
SEBI later investigated trades in the RPL scrip between November 1 and November 29, 2007. It found that RIL had appointed 12 entities to take short positions in the November 2007 RPL futures contract, while RIL itself sold RPL shares in the cash segment.
SEBI alleged that RIL used these entities to build large short positions in the futures and options segment in excess of prescribed position limits. It further alleged that RIL sold a large number of RPL shares in the last few minutes of trading on November 29, 2007. According to SEBI, this depressed the settlement price of the November 2007 RPL futures contract and allowed RIL to make unlawful gains.
In March 2017, SEBI's whole time member held that RIL had adopted a fraudulent and manipulative strategy. RIL was directed to disgorge ₹447.27 crore with 12% interest. RIL and the 12 entities were also barred from dealing in equity derivatives in the futures and options segment for one year.
RIL challenged the order before the Securities Appellate Tribunal (SAT). In November 2020, SAT dismissed RIL’s appeal by a 2:1 majority and upheld the disgorgement direction. RIL later challenged that ruling before the Supreme Court.
Separately, SEBI’s adjudicating officer initiated penalty proceedings on the same broad allegations. In January 2021, the adjudicating officer imposed penalties of ₹25 crore on RIL, ₹15 crore on Mukesh Ambani, ₹20 crore on Navi Mumbai SEZ Private Limited and ₹10 crore on Mumbai SEZ Limited.
In December 2023, SAT upheld the ₹25 crore penalty against RIL, holding that the company’s case was covered by the earlier 2020 SAT ruling.
However, SAT quashed the penalty against Mukesh Ambani. It held that Section 27 of the SEBI Act, as it stood in 2007, applied only to “offences” by companies and not to civil penalty proceedings. SAT said the provision was amended in 2019 to cover “contraventions” as well, but the amendment was substantive and prospective.
SAT also quashed the penalties against Navi Mumbai SEZ and Mumbai SEZ, holding that SEBI had failed to establish their involvement in the alleged manipulative trades.
The Supreme Court today upheld the ₹25 crore penalty on RIL imposed by SEBI's adjudicating officer.
However, it declined to interfere with the direction to disgorge ₹447.27 crore.
RIL was represented by Senior Advocates Harish Salve and Ritin Rai with Advocates KR Sasiprabhu, Amey Nabar, Aditya Swarup, Swati N Jain, Vishnu Sharma, Ritika Sinha, Yasharth Misra, Ribhav Pande, Namrata Saraogi and Madhav Agarwal.
SEBI was represented by Senior Advocates Arvind Datar and Pratap Venugopal with advocate Abhishek Singh.