SAT asks Sebi to look at RIL consent plea; next hearing on October 29

The Securities Appellate Tribunal (SAT) today suggested that market regulator Sebi could look at considering the consent application of Reliance Industries to settle the 6-year-old insider-trading case against the firm, and adjourned the hearing to October 29.

SAT has been hearing the appeal filed by RIL against Sebi in the insider-trading case related to its erstwhile subsidiary Reliance Petroleum Ltd (RPL) dating back to 2007.

The company is also contesting the regulator's decision of last May to keep the case out of the consent mechanism, suggesting the amount involved is too high.

Under Sebi's consent mechanism, companies can seek to settle cases with the regulator after paying certain charges and disgorgement of any ill-gotten gains.

Hearing the arguments, which have been adjourned eight times in recent past alone, SAT presiding officer J P Devadhar said: "Without going into the merits of the case, we want to know if Sebi can consider RIL's consent application in the interest of justice."

In response to this, Sebi senior counsel Darius Khambata said he will inform the tribunal after discussing the suggestion with the regulator.

Following this, SAT adjourned the further hearing on the petition to October 29.

The case dates back to 2007, when before the merger of the RPL with itself, RIL sold 4.1 per cent stake in Reliance Petroleum for Rs 4,023 crore in the futures market to allegedly prevent a price correction and later in the spot market, covering the share sales in the futures market.

As per the Sebi findings, the company booked a profit of Rs 513 crore in the futures segment through this deal. RPL was later merged with RIL.

Sebi claimed that the company was aware of the sale of shares and sold futures ahead of that, therefore amounting to insider trading.

Following this Sebi ordered a probe and found that RIL had violated insider-trading norms. Though it approached Sebi for consent settlement, the regulator did not entertain the application, forcing RIL to move SAT.

At the last hearing on September 25, SAT had asked Sebi to produce the file on the alleged RIL insider trading case and the notings of the committee that decided to withdraw the company from the consent mechanism.

Under the consent mechanism companies/individuals can seek to settle cases with paying a fine but without admitting to or denying any wrongdoing. In case the allegations are proved, then a company may end up paying up to three times the profit made from the illegal trade practices.

Accordingly, in the case of RIL, the company could pay over Rs 1,500 crore, as it has been alleged that it booked Rs 513 crore from insider trading.

RIL has challenged the show-cause notice issued by Sebi in December 2010 citing that it was not given adequate access to the documents on which the show-cause was based.

RIL has also challenged Sebi for taking the case out of the consent process and also for changing the norms governing this mechanism, especially when the case was already under its consideration.

In May 2012, Sebi had tightened the consent mechanism framework. As a result, many cases, including those related to insider trading, are not being settled through this mechanism.

On January 3 this year, Sebi published a list of 149 consent pleas, including 16 from entities related to the RIL Group, which it had not found suitable for consent settlement.

These include applications of RIL itself and that of RIL chairman Mukesh Ambani's close aide Manoj Modi.

At the last hearing, SAT had rejected an intervention petition filed in the case by a little-known Urdu daily editor M Furquan who claimed that there could be possible collusion between Sebi and RIL to settle the matter.

The matter was last heard by SAT on February 21, when the tribunal sought time to study the application, which Sebi termed as "not maintainable". Since then RIL has been seeking adjournments. The case has been adjourned every month since March.