Mumbai: India’s Supreme Court ordered the Securities and Exchange Board of India to refund Rs2.5 billion to Reliance Industries Ltd after overturning a market fraud ruling against the company.
The court set aside a lower court ruling and SEBI’s 2020 order, which had accused the Mukesh Ambani-led company of manipulative trading practices linked to Reliance Petroleum Ltd shares.
The case stemmed from Reliance Industries’ November 2007 decision to sell about a 5% stake in Reliance Petroleum Ltd. Before the sale, the company entered arrangements with 12 entities that took short positions in RPL futures contracts.
SEBI had ruled in 2020 that the arrangement amounted to fraud and market manipulation. The regulator said the trades bypassed position limits in derivatives, cornered the market and influenced settlement prices.
SEBI had directed Reliance Industries to repay Rs 4.47 billion to investors. The Securities Appellate Tribunal later upheld SEBI’s findings, after which the company moved the Supreme Court.
The Supreme Court held that breaching position limits could constitute a regulatory violation but, by itself, did not prove fraud. It said hedging was a legitimate risk-management tool and did not require a perfect 1:1 ratio.
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Sumit Agrawal, senior partner at Regstreet Law Advisors, said that concentrated positions, aggressive trading or violations of trading norms may invite regulatory action but, by themselves, do not establish market abuse.
