The Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs 25 crore and Rs 15 crore respectively on Reliance Industries (RIL) and its Chairman Mukesh Ambani for manipulative trading.
The SEBI order observed that RIL had entered into a well-planned operation with its agents to corner the open interest in the RPL (Reliance Petroleum) futures and to earn undue profits from the sale of RPL shares in both cash and futures segments and to dump a large number of RPL shares in the cash segment during the last ten minutes of trading on the settlement day resulting in a fall in the settlement price. The case pertains to 2007.
It also observed that Mukesh Ambani being the Chairman & Managing Director of RIL, was responsible for its day-to-day affairs and thereby, liable for the “manipulative trading” done by RIL.
The order noted that Navi Mumbai SEZ Pvt Ltd and Mumbai SEZ Ltd have allegedly aided and abetted RIL by providing funds to one of the agents appointed by RIL, who in turn provided funds to other 11 agents for making the margin payments for the short positions in RPL November Futures.
The capital market regulator imposed penalties of Rs 20 crore and Rs 10 crore on Navi Mumbai SEZ and Mumbai SEZ respectively.
As per SEBI, it was observed that a resolution was passed by the Board of Directors on March 29, 2007, which approved the operating plan for the year 2007-08 and resource requirements of the next two years — around Rs. 87,000 crore. Thereafter, RIL decided to sell approximately 5 percent of its shareholding in RPL (up to 22.5 crore RPL shares) in November 2007.
Subsequently, RIL admittedly appointed 12 agents, between October 30, 2007, to November 3, 2007, to undertake transactions in the November 2007 RPL Futures (settlement period November 1- November 29, 2007) on its behalf.
The said 12 agents appointed by RIL took short positions in the F&O Segment on behalf of RIL, while RIL undertook transactions in RPL shares in the cash segment.
During the period of November 1, 2007 to November 29, 2007, various transactions were undertaken by RIL in the cash segment and by RIL through the agents in the F&O segment. From November 15, 2007 onwards, RIL’s short position in the F&O segment constantly exceeded the proposed sale of shares in the cash segment.
Further, the probe showed that on November 29 2007, RIL sold a total of 2.25 crore shares in the cash segment during the last 10 minutes of trading resulting in fall in the prices of RPL shares, which also lowered the settlement price of RPL November Futures in the F&O Segment.
RIL’s entire outstanding position of 7.97 crores in the F&O Segment was cash settled at this depressed settlement price resulting in profits on the said short positions. The said profits were transferred by the agents to RIL as per a prior agreement, said the order dated January 1.
SEBI noted that an order noted dated March 24, 2017, had directed RIL to disgorge an amount of Rs 447.27 crore along with interest calculated at the rate of 12 percent per annum from November 29, 2007, onwards till the date of payment.
Further, RIL was prohibited from dealing in equity derivatives in the F&O segment of stock exchanges, directly or indirectly, for a period of one year from the date of the said Order.
“I find it appropriate to consider the direction in the nature of debarment and the disgorgement that has already been passed against RIL herein as a relevant factor while deciding the quantum of penalty,” it said.
“I have also considered the quantum of loans advanced by Notice-3 (Navi Mumbai SEZ) and Notice-4 (Mumb ai SEZ) to the agent appointed by RIL. Considering the above, I proceed to impose an appropriate penalty on each of the notices that serve as a deterrent to the notices and others indulging in such fraudulent trade practices.”