Insider trading case: SAT to hear RIL plea on Jan 24

Appeal against Sebi's refusal to give documents and discriminatory application of consent circular

The Securities Appellate Tribunal (SAT) today adjourned the admission of a plea made by Reliance Industries Ltd (RIL) against market regulator Securities and Exchange Board of India (Sebi) to January 24 in an insider trading case.

The Mukesh Ambani-led company, in its appeal before SAT, has challenged Sebi’s rejection of consent request and refusal to give documents related to the case.

SAT presiding officer PK Malhotra asked whether the appeal was maintainable before the tribunal as the consent process is “without any prejudice to the legal proceedings. “Can an ADR (alternative dispute resolution) be a subject matter of appeal before the tribunal....I am very much doubtful, in the absence of a statutory backing,” said Malhotra.

“This appeal is a complete non-starter. It is in breach of their own undertaking that under this procedure you do not have an appeal. A party when it files an application undertakes it will not agrue on it. Secondly, appeals are not contemplated under this procedure at all. It is outside the adjudication process, it will set an extremely grave preceding,” said Rustomjee.

Senior counsel Janak Dwarkadas, who appeared for RIL, said the appeal is primarily about the procedures adopted by Sebi where it first said that the case is consentable and later back tracked on it.

“In April 2011, Sebi said I (RIL) am entitled to consent. Later, they say now you are not entitled. No authority under the constitution can act in this manner,” said Dwarkadas.

This case dates back to 2007, when RIL had allegedly made unlawful gains by trading in the shares of erstwhile Reliance Petroleum Ltd during the merger between the two. Sebi, which investigated the matter in 2008, had issued a show case notice to RIL in the case in 2010.

According to Dwarkadas, Sebi, in a letter written to RIL in 2011, had said this case can be settled through the consent process. In the same letter, Sebi had also stated that they will not proceed with the hearing on the show cause till the consent proceedings are going on, said Dwarkadas. Following which, to have a “meaningful dialogue”, RIL asked certain documents.

“You don’t first give the documents. When I file an appeal you give not all but some of the documents. Before the ink on the paper has become dry you write to me and say this is not consentable,” said Dwarkadas.

RIL counsel said it is challenging Sebi’s application of the consent circular in a “discriminatory manner where one party can take advantage and one cannot”.

Sebi counsel Rustomjee also sought more time from SAT to study RIL’s appeal stating it received the copy of the petition just a day earlier.

The consent mechanism, similar to out-of-court settlements, is an agreement between the regulator and violator to drop the charges of wrongdoings without admission or denial of guilt. The settlement terms could involve monetary penalty and voluntary debarment from the capital market.