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The Securities and Exchange Board of India (Sebi) on Wednesday filed a caveat in the Supreme Court to prevent any ex-parte order being passed in the case related to alleged fraudulent trade practices adopted by Reliance Industries in 2007.

“Let nothing be done in the matter without notice to the respondent/caveator. The caveator was a party before the Securities Appellate Tribunal, Mumbai,” Sebi stated.

The caveat has been filed to pre-empt any order being passed in its absence as the Mukesh Ambani-led RIL is likely to move the court questioning the Sebi's consent order process through which the latter allows companies to settle disputes by paying a sum of money without admission or denial of wrongdoing.

SAT on Monday dismissed the company’s appeal, saying it is not maintainable in the insider-trading case. The tribunal while dismissing the company’s appeal, upheld a INR 11 crore ($1.83 million) penalty imposed on Reliance Petroinvestments (RPL) by Sebi last year in the seven-year old insider-trading case. RIL has since sought the dismissal of the fine and Sebi’s insider-trading ruling.

The SAT order said Sebi investigations have proved that RIL, in connivance with other entities related/connected to it, took short positions in the futures and options (F&O) segments of the National Stock Exchange in the RPL scrip and sold around 20 crore shares, thereby making an illegal gain of INR 513.12 crore. The market regulator had tweaked its consent norms in 2012 and made them stricter. However, it excluded serious offences, such as insider trading, from the settlement process.

The Ambani firm had argued that it was not given a chance by Sebi to settle the case under a process called consent proceeding. The case relates to RPL’s merger with RIL in 2007 through a process that involved the alleged short sale of shares in RPL by entities related to RIL ahead of the union. RIL sold a 4.1 Percent  stake in RPL, but to prevent a slump in the latter’s stock, the shares were sold first in the futures market and, later, in the spot market, covering the share sales in the futures market.

In 2008, Sebi started a probe into the matter and initiated quasi-judicial proceedings. Sebi’s claim is that because the company was aware of the sale of equity shares and sold futures ahead of that, its actions amounted to fraudulent and unfair trade practice.

Through the dealings, RIL received revenue of INR 4,023 crore and its profit from the transaction in the futures segment was INR 513 crore. RIL challenged a show-cause notice issued by Sebi in December 2010.

Source-On Request