In a 54-page order released late on Friday, markets regulator Sebi banned Reliance Industries and 12 of its associate companies from trading in equity derivatives for one year "directly or indirectly".
Sebi also directed India's largest private sector company to pay up - within 45 days — Rs 447 crore plus interest on it at 12% for almost 10 years — which adds up to nearly Rs 1,000 crore — for alleged fraudulent trading in a case that dates back to 2007. Derivatives are financial instruments traded on exchanges which include futures and options (F&O) contracts, the prices of which are directly dependent on the price of the stock. The case relates to alleged fraudulent trading in the F&O segment in Reliance Petroleum, which was a subsidiary of RIL and has since been merged with the petroleum-to-telecom major.
Sebi's whole-time member G Mahalingam said the directions were being passed after taking into consideration the magnitude of the fraud across the markets. "I am inclined to pass certain directions against the noticees in order to protect the interest of investors and reinstil their faith in the regulatory system," the order said. "The noticees may, however, square off or close out their existing open positions."
The 12 other entities are Gujarat Petcoke and Petro Product Supply, Aarthik Commercials, LPG Infrastructure India, Relpol Plastic Products, Fine Tech Commercials, Pipeline Infrastructure India, Motech Software, Darshan Securities, Relogistics (India), Relogistics (Rajasthan), Vinamara Universal Traders and Dharti Investment and Holdings.
The RIL group had earlier sought to settle the case, but Sebi had refused. The proceedings in the long-pending case were expedited in the last few months. In an email response to TOI, an RIL spokesperson said the company was seeking legal opinion and would challenge what it dubbed "untenable findings" in the Sebi order. "The trades in RPL shares which were examined by Sebi were genuine and bona fide transactions," he added.
He went on to add: "These were carried out keeping the best interest of the company and its shareholders in view. Sebi appears to have misconstrued the true nature of the transactions and imposed unjustifiable sanctions.
"We are in the process of consulting our legal advisors. We propose to prefer an appeal and challenge the order in the Securities Appellate Tribunal. We remain confident of fully justifying the veracity of the transactions and vindicating our stand.
"We have full confidence in the judicial process and we propose to vigorously exercise all options available to us to challenge the untenable findings in the order."