SAT grants interim relief to RIL in 'illegal gains' case

Allows the company to take exposure to derivatives via MFs

The Securities Appellate Tribunal (SAT) on Wednesday granted interim relief to Reliance Industries (RIL) by allowing the company to take exposure to equity derivatives via mutual funds (MFs), provided it met certain conditions.

The tribunal was hearing an appeal submitted by the Mukesh Ambani-led company against market regulator Securities and Exchange Board of India (Sebi) order, barring the company from accessing the derivatives market for a period of one year. 

In the order dated March 24, Sebi had also asked the company to disgorge Rs 447 crore, with 12 per cent interest since 2007, it made "illegally".

SAT gave an in-principal approval for exposure to derivatives with a pre-condition that RIL will share the list of MFs that it intends to invest in. It also asked the company to submit the application before the regulator for it.

"Once the company makes a separate application, Sebi can consider it and take a decision as per the law," said SAT.

After admitting the case, the tribunal adjourned the next hearing in the matter by eight weeks.

Senior lawyer Harish Salve, representing the RIL, sought clarification from SAT over the exposure to derivatives through MFs.

He requested tribunal to clear stance on whether participation in the future and options (F&O) segment through the indirect route would be in violation of the Sebi order.

"Sebi order has provided a blanket ban on RIL from dealing in derivatives. Hence, the clarification was required. Also, there must be some transactions in the pipeline and RIL did not want the order to impact it," said HP Ranina, senior corporate lawyer.

Other objective could be to hedge the portfolio through indirect exposure to derivatives, he added.

The case dates back to 2007, when RIL and other related entities took short positions in the F&O segment in the RPL stock, at a time when a large block of shares in the company was to be sold in the cash segment. The share sale caused the stock price of RPL to dip in the cash and derivatives segment, benefiting it by Rs 513 crore.

RIL had said, in a media release, that there was neither market manipulation nor undue profits which accrued to them from the transaction. "Sebi's conclusions were based on surmises, conjectures and a hindsight view of the transactions and on untenable reasoning," said the company further.