Reliance arm moves SAT against Sebi penalty for insider trading

Reliance Petroinvestments, a subsidiary of Mukesh Ambani-led Reliance Industries Ltd (RIL), has approached the Securities Appellate Tribunal against the capital markets regulator, which imposed a Rs 11-crore penalty on the company in the Indian Petrochemicals Corp Ltd (IPCL) insider trading case.

The Securities and Exchange Board of India (Sebi) had in May accused Reliance Petroinvestments of buying shares of IPCL in early 2007, just before it declared an interim dividend and announced the merger of IPCL with RIL.

The Sebi order to impose fine on the company was based on Reliance Petroinvestments' trades in IPCL between February 27, 2007 and March 2, 2007. During this period, the RIL arm bought about 2.13 million shares of IPCL at an average price of Rs 259.42 per share for Rs 55.5 crore prior to the two announcements, the order said.

Reliance Petroinvestments received roughly 426,000 shares of RIL against 2.13 million shares of IPCL acquired prior to the dissemination of the price-sensitive information, it said.

"It's observed from the investigation report that Reliance Petroinvestments received a dividend of approximately Rs 1.3 crore and made a notional profit of approximately Rs 2.55 crore (difference between acquisition cost of IPCL shares and market price of RIL shares on dealing dates based on average price)," Sebi's adjudicating officer, D Ravi Kumar, had said in the order.

The order noted Reliance Petroinvestments had filed a consent application on November 8, 2011. The consent application was rejected and the same was communicated to the company through a letter dated November 1, 2012. The consent scheme is a window available for companies for settling disputes on payment of a fee.

Reliance Petroinvestments was listed as a "promoter having control over the company" and RIL as a "person(s) acting in concert", according to disclosures made by IPCL, said the Sebi order. Reliance Petroinvestments holds more than one-third of the total voting power of IPCL and RIL holds the entire share capital of Reliance Petroinvestments through two of its wholly-owned subsidiaries.

Separately, the capital market regulator, on April 10, passed an order clearing Manoj Modi (a close aide of RIL chief Ambani) and his wife Smita Modi of an insider trading case.