India’s main securities tribunal on Monday upheld Rs 11 crore penalty imposed on a unit of Reliance Industries by the Securities and Exchange Board of India (Sebi) in a seven-year old insider trading case.
The ruling by the Securities Appellate Tribunal (SAT) marks a victory for the Sebi, which imposed its largest ever fine for an insider trading case on Reliance Petroinvestments Ltd last year over share transactions involving a separate company.
Reliance Industries has since sought the dismissal of the fine and Sebi’s insider trading ruling. Although decisions by SAT - an independent quasi-judicial body that rules on appeals against orders passed by Sebi - are binding, they can be appealed to the Supreme Court.
“We have no option but to dismiss the appeal,” SAT’s presiding officer J P Devadhar said on Monday. A Reliance Industries spokesman, contacted by Reuters, did not have an immediate comment about the ruling. Shares in Reliance rose 0.3 per cent, under-performing a 1.4 per cent gain in the broader Nifty.
In its ruling last year, Sebi said Reliance Petro-investments had bought shares of Indian Petrochemicals Corporation Ltd (IPCL) in 2007, just before Reliance Industries announced an acquisition of IPCL. Reliance Petroinvestments is wholly owned by energy conglomerate Reliance Industries, controlled by India’s richest man Mukesh Ambani.
In its appeal to SAT, Reliance Industries said it had not been given a chance by Sebi to settle the case under a process called consent proceeding. Reliance has previously said Reliance Petroinvestments had bought shares in IPCL independently and was not aware of the impending acquisition by the energy conglomerate.
Poor track record
On Monday, SAT’s Devadhar ruled the Reliance case could not be settled under consent proceeding rules introduced last year. Sebi has a poor track record of fighting insider trading in India, and its rulings have often been bogged down by lengthy appeal processes.
But recent moves suggest the market regulator is getting more serious about countering securities fraud. Last month, Sebi opened a probe against a Hong-Kong based hedge fund, accusing it of shorting shares of a company before the announcement of a share sale.