The Securities Appellate Tribunal (SAT) on Monday set aside the penalty imposed by Sebi on Reliance Industries Ltd's Chairman Mukesh Ambani and two other entities in a case related to alleged manipulative trading in the shares of erstwhile Reliance Petroleum Ltd (RPL) back in November 2007.
The ruling has come after all the entities appealed before the tribunal against the order passed by the Securities and Exchange Board of India (Sebi) in January 2021.
In January 2021, Sebi imposed a Rs 25 crore fine on Reliance Industries Ltd(RIL), Rs 15 crore on Ambani, who is the company's Chairman and Managing Director, Rs 20 crore on Navi Mumbai SEZ Pvt Ltd and Rs 10 crore on Mumbai SEZ Ltd in RPL case.
Both -- Navi Mumbai SEZ and Mumbai SEZ -- are promoted by Anand Jain, who once served in the Reliance Group.
In its 87-page order on Monday, the tribunal quashed Sebi's order passed in 2021 against Ambani, Navi Mumbai SEZ and Mumbai SEZ.
The tribunal also directed the Sebi to return the fine amount in case it has been deposited by them with the regulator.
The case pertains to sale and purchase of RPL shares in the cash and the futures segments in November 2007. This followed RIL's decision in March 2007 to sell around 5 per cent stake in RPL, a listed subsidiary that was later merged with RIL in 2009.
The tribunal said that RIL's board had specifically authorised two persons to decide the disinvestment.
Further, the tribunal noted that it cannot be suggested that the Managing Director is ipso facto responsible for every alleged contravention of law by the corporate entities.
"In view of the stark evidence in the form of minutes of the two board meetings of RIL which conclusively proves that the impugned trades were carried out by two senior officials without the knowledge of the appellant, no liability can be fastened upon noticee no. 2 (Ambani)," the tribunal said.
Sebi failed to prove that Ambani was involved in the execution of the trades carried out by two senior executives, it added.
With regard to RIL, a bench consisting of Justice Tarun Agarwala and Presiding Officer Meera Swarup dismissed the company's appeal saying "we do not find any reason to interfere with the impugned order in so far as it relates to the company RIL".
The impunged order refers to the order passed by Sebi in March 2017 wherein it had directed RIL and certain other entities to disgorge over Rs 447 crore in the RPL case. In November 2020, the tribunal dismissed the company's appeal against the order.
Meanwhile, in its order passed in January 2021, Sebi had stated that RIL appointed 12 agents to undertake transactions in the November 2007 RPL Futures. These 12 agents took short positions in the Futures and Options (F&O) segment on behalf of the company while the company undertook transactions in RPL shares in the cash segment.
Sebi, in its order, had also alleged that RIL violated PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) rules by entering into a well-planned operation with its appointed agents to earn undue profits from the sale of RPL shares in both the cash and the F&O segment.
Further, the regulator had alleged that the company manipulated the settlement price of November 2007 RPL Futures contract by dumping large number of RPL shares in the cash segment during the last 10 minutes of trading on November 29, 2007.
The execution of the fraudulent trades affected the price of the RPL securities in both cash and F&O segments and harmed the interests of other investors, Sebi had stated.
It was alleged that Navi Mumbai SEZ and Mumbai SEZ financed the whole manipulation scheme by funding the 12 entities.
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