The Securities and Exchange Board of India (Sebi) has disposed of the adjudication proceedings against Reliance Petroinvestments Ltd (RPIL) — controlled by Reliance Industries (RIL) of the Mukesh Ambani group — in an alleged insider trading case involving shares of the erstwhile Indian Petrochemicals Corporation Ltd (IPCL).
“RPIL is not liable for monetary penalty in the instant matter,” the Sebi said in a 50 page order. “In the absence of any evidence by the investigating authority to establish the access of UPSI (unpublished price sensitive information) to the noticee (RPIL), it can be concluded that the noticee did not have access to UPSI while trading in the scrip of IPCL. Hence, it can be concluded that the noticee and RIL are not ‘insider’ as alleged in the show-cause notice in terms of provisions of Regulation 2(e) of PIT Regulations,” the Sebi said. Sebi had earlier in May 2013 imposed a penalty of Rs 11 crore on RPIL in the same case, but the order was later set aside by the Securities Appellate Tribunal (SAT) in December last year and the regulator was asked to look afresh into the case and pass another order within three months.
After Sebi’s earlier order of 2013, RPIL had approached SAT, which ruled on December 7, 2015, that the regulator’s order was “passed merely on the basis of presumption without considering the arguments advanced on behalf of the Appellant to rebut the presumption”. SAT had, therefore, quashed that order and directed Sebi to pass “a fresh order on merits and in accordance with law”. As the firm had already deposited the amount of penalty with Sebi, SAT had said the amount would remain with Sebi subject to the result of the fresh order to be passed by the Sebi.
The Sebi had said in its earlier order that RPIL made profits of over Rs 3.82 crore through these trades. After taking into account the quantum and nature of the violations, Sebi had then imposed a penalty of Rs 11 crore on RPIL, which was listed as one of the promoter entities by IPCL itself in its regulatory filings as on March 31, 2006.
According to the Sebi, IPCL shares witnessed sudden rise in its price and trading volume on March 8, 2007. The company made an announcement on March 2, 2007, to the stock exchanges about its intention to declare interim dividend and on March 7, 2007, it announced that it was going to consider and recommend amalgamation of the company with RIL. Based on this news and alert generated at the exchanges, an analysis of dealing in shares of IPCL was carried out by the stock exchanges for the period February 22, 2007, to March 08, 2007, and it was observed that certain entities had bought large quantities of IPCL shares before aforesaid announcements, Sebi said.
“It was commonly known that RIL acquired IPCL and RPIL was the entity through which the acquisition was undertaken. It is only natural that RIL or its wholly owned subsidiary will fund RPIL for its business needs including monies required for creeping acquisition of IPCL shares. The funding of RPIL by RIL can in no way be treated as evidence (direct or circumstantial) to conclude that RPIL was in possession of first alleged UPSI and the second alleged UPSI,” RPIL informed the Sebi.