The Telegraph
Tuesday , July 1 , 2014
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Tribunal spikes Reliance plea

Mumbai, June 30: The Securities Appellate Tribunal (SAT) today dismissed Reliance Industries’ appeal against Sebi for rejecting its consent application in a seven-year old insider trading case.

“We have no option but to dismiss the appeal,” SAT’s presiding officer J.P. Devadhar said on Monday.

Decisions by SAT — an independent quasi-judicial body that rules on appeals against orders passed by Sebi — are binding, but they can be taken up in the Supreme Court.

The dispute relates to the sale of around 20 crore Reliance Petroleum (RPL) shares by RIL in November 2007.

Sebi has alleged that RIL, in connivance with other entities, took short positions in the futures and options segments of the NSE in the scrip of RPL. At the same time, it sold RPL shares in the cash segment, thereby making illegal gains of Rs 513.12 crore.

In 2008, the market regulator initiated a probe into the matter. It later came to the conclusion that RIL had violated insider trading norms.

Sebi had notified the new consent norms on January 9, 2013, after issuing draft regulations in May 2012. The new norms exclude cases such as insider trading from the purview of the consent process. Moreover, the provisions apply with retrospective effect from April 2007.

Consent mechanism is a process under which Sebi settles charges against a particular party without admission or denial of guilt by the latter.

The market regulator did this in exercise of powers conferred under Section 15JB of the Sebi Act, 1992 and Section 23JA of Securities Contracts (Regulation) Act, 1956 and Section 19IA of the Depositories Act, 1996.

In its order today, a full bench of the tribunal said it was dismissing the appeal by RIL as Section 15JB(4) bars any appeal against an order passed in consent proceedings.

“Ordinarily, we would have considered maintainability of appeal first and thereafter considered merits of appeal only if the appeal is maintainable.”

The tribunal said Reliance’s application could not be allowed because the new consent mechanism norms were valid with retrospective effect.

Senior counsel for RIL Janak Dwarkadas said the Sebi decision be quashed and set aside and the market regulator be directed to dispose of RIL’s consent application on merit.

RIL also pointed out that Sebi did not inspect all documents referred to and relied upon in its show cause notice of December 2010 related to the RPL transaction. Its counsel maintained that due to this, it did not get an opportunity to explain as to why the matter needed to be settled.

The tribunal also came down heavily on the market regulator. “Sebi ought to have given reasonable opportunity to the appellant (RIL) to demonstrate as to why the dispute deserves to be settled,’’ it observed.

After the verdict, RIL in a statement said: “This appeal was maintainable and the rejection of the consent application was wrong.

“Clearly the appeal would have been allowed had it not been for the ordinances having retrospective effect and that its appeal was maintainable under the Sebi Act before retrospective amendment,” RIL said.

The RIL scrip today closed at Rs 1,014.70, registering a gain of 0.16 per cent, over its previous close of Rs 1,013.05.

Investment deferred

Reliance Industries will defer investments in developing newer fields such as the R-Cluster in the KG-D6 block if the government does not hike gas prices to make them economically viable to produce.

RIL’s Dhirubhai-34, or the R-Cluster field, in the flagging KG-D6 block was to produce about 13 million standard cubic metres per day of gas, equivalent to present day output from D1&D3 as well as MA fields, by 2017-18.

Minority partner Niko Resources said the KG-D6 consortium believed the government has “contravened the terms of the production sharing contract” by not raising prices on the due date of April 1.

“If the expected new price for natural gas sales from the D6 Block in India is not notified by the government, a significant portion of the contractor group’s planned investments in the block are expected to be deferred,” it said in its fourth quarter earnings statement.