Mumbai: India’s markets regulator slapped a fine of 250 million rupees ($3.42 million) on Reliance Industries and Rs 150 million on its chairman Mukesh Ambani on Friday for fraudulent trades while selling a stake in a subsidiary in 2007.
It is alleged by the Securities and Exchange Board of India (SEBI) that the oil-to-telecoms conglomerate took derivative short positions in shares of separately listed Reliance Petroleum in 2007. This was done through third parties before it sold a 5 per cent stake in the business, reported news agencies.
RIL had sold 4.1 per cent of its stake in RPL in March 2007. However, to avoid a plunge in the RPL share price, the equity was apparently sold initially in the futures market and later in the spot market.
“It was also observed that Mukesh D. Ambani, being the CMD of RIL, was responsible for its day-to-day affairs and thereby, liable for the manipulative trading done by RIL,” the SEBI order said.
“It was observed that Navi Mumbai SEZ and Mumbai SEZ 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,” SEBI was quoted as saying by news agency PTI.
However, Reliance did not immediately respond to requests for comment either from the company or from chairman Mukesh Ambani.
In an order of 95 pages, SEBI’s Adjudicating Officer BJ Dilip said any manipulation in the volume or price of securities always erodes investor confidence in the market.
“In this case, the general investors were not aware that the entity behind the above F&O segment transactions was RIL. The execution of the… fraudulent trades affected the price of the RPL securities in both cash and F&O segments and harmed the interests of other investors,” the order said.
“I am of the view that such acts of manipulation have to be dealt sternly so as to dissuade manipulative activities in the capital markets,” the Adjudicating Officer said while noting that execution of manipulative trades affects the price discovery system itself.
SEBI had ordered RIL and certain other entities to disgorge over ₹447 crore in the RPL case on March 24, 2017. In November 2020, the Securities Appellate Tribunal (SAT) dismissed the company’s appeal against the order.
