SAT defers hearing on RIL's insider trading case to Nov 11

The Securities Appellate Tribunal on Tuesday put off to November 11 the hearing on Reliance Industries' appeal against market regulator Securities and Exchange Board of India in the 2007 insider-trading case.

At the last hearing on October 11, SAT had suggested to Sebi to look at considering the RIL application for a consent settlement that allows companies and individuals to settle disputes by paying a fine without admission or denial of the alleged wrongdoing.

On Tuesday, Sebi submitted an affidavit to the tribunal following which the quasi judicial body adjourned the hearing to study the affidavit.

The tribunal has been hearing the appeal filed by Reliance Industries Limited against Sebi in the insider-trading case related to its erstwhile subsidiary Reliance Petroleum Ltd dating back to 2007.

The company is also contesting the regulator's decision of last May to keep the case out of the consent mechanism, suggesting the amount involved is too high.

Under Sebi's consent mechanism, companies can seek to settle cases with the regulator after paying certain charges and disgorgement of any ill-gotten gains.

This is the ninth time that the hearing in the case has been adjourned.

The case dates back to 2007, when before the merger of the RPL with itself, RIL short-sold 4.1 per cent stake in Reliance Petroleum for Rs 4,023 crore (Rs 40.23 billion) in the futures market to allegedly prevent a price correction and later in the spot market, covering the share sales in the futures market.

As per the Sebi findings, the company booked a profit of Rs 513 crore in the futures segment through this deal worth Rs 4,023 crore.

RPL was later merged with RIL.

Sebi claimed that the company was aware of the sale of shares and sold futures ahead of that, therefore amounting to insider trading.

Following this, Sebi ordered a probe and found that RIL had violated insider-trading norms.

Though it approached Sebi for consent settlement, the regulator did not entertain the application, forcing RIL to move SAT.

At a previous hearing, the SAT had asked Sebi to produce the file on the alleged RIL insider trading case and the notings of the committee that decided to withdraw the company from the consent mechanism.

Under the consent mechanism, companies/individuals can seek to settle cases with paying a fine but without admitting to or denying any wrongdoing.

In case the allegations are proved, then a company may end up paying up to three times the profit made from the illegal trade practices.

Accordingly, in the case of RIL, the company could pay over Rs 1,500 crore (Rs 15 billion), as it has been alleged to have booked Rs 513 crore (Rs 5.13 billion) from the insider trading.

RIL has challenged the show-cause notice issued by Sebi in December 2010 citing that it was not given adequate access to the documents on which the show-cause was based.

RIL has also challenged Sebi for taking the case out of the consent process and also for changing the norms governing this mechanism, especially when the case was already under its consideration.

In May 2012, Sebi had tightened the consent mechanism framework.

As a result, many cases, including those related to insider trading, are not being settled through this mechanism.

On January 3 this year, Sebi published a list of 149 consent pleas, including 16 from entities related to the RIL Group, which it had not suitable for consent settlement.

These include applications of RIL itself and that of RIL chairman Mukesh Ambani's close aide Manoj Modi.

At a September 25 hearing, SAT had rejected an intervention petition filed in the case by an Urdu daily editor M Furquan who claimed that there could be possible collusion between Sebi and RIL to settle the matter.

The matter was last heard by SAT on February 21, when the tribunal sought time to study the application, which Sebi termed as ‘not maintainable’. Since then RIL has been seeking adjournments.

The case was then adjourned in March, April and May, June, July, August and September.