Big relief to Reliance from Supreme Court: Fraud allegations and disgorgement order of ₹447 crore canceled in RPL trading case

The Supreme Court on Friday (May 29) gave a major relief to Reliance Industries Ltd (RIL) in the 2007 Reliance Petroleum Ltd (RPL) futures trading case, setting aside the Securities and Exchange Board of India’s (SEBI) findings of fraud and market manipulation. Along with this, the court also canceled the disgorgement order of ₹447.27 crore imposed on Reliance.

However, the apex court has upheld a separate penalty of ₹25 crore imposed by SEBI. Also, the Supreme Court directed SEBI to return the ₹250 crore already deposited by Reliance.

The case pertains to trading in shares and futures contracts of Reliance Petroleum Limited (RPL) in November 2007. At that time RPL was a listed subsidiary of Reliance Industries and RIL held about 75 per cent stake in it. The company was planning to sell about 22.5 crore shares during that time, which was about 5 percent of its total stake.

According to the SEBI investigation, Reliance had created large short positions in RPL futures contracts using 12 different entities. Along with this, the company also sold a large amount of shares in the cash market.

Regulatory body SEBI had alleged that in the last minutes of trading on 29 November 2007, Reliance sold a large number of RPL shares. According to SEBI, the purpose of this strategy was to bring down the settlement price of RPL futures contracts, thereby giving undue advantage to the company.

Based on these findings, SEBI had in 2017 ordered Reliance to return ₹447.27 crore and interest thereon. The company and its associated entities were also banned from trading in the equity derivatives market for one year. Reliance had challenged this order in the Securities Appellate Tribunal (SAT). SAT had upheld the decision of SEBI in the year 2020. After this the matter reached the Supreme Court.

Now the Supreme Court bench of Justice JB Pardiwala and Justice R Mahadevan has given a big relief to Reliance by overturning SEBI’s findings related to fraud and market manipulation. The court has also canceled the disgorgement order.

However, the court has upheld the penalty of ₹25 crore imposed by the SEBI Adjudicating Officer. With this decision, one of the most talked about cases of the Indian stock market has got a partial legal break.

This decision is being considered very important in the Indian corporate and investment world, because this matter has been in discussion for a long time regarding market regulation, futures trading and corporate accountability.

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