SAT adjourns hearing on Reliance case to Aug 12

The Tribunal has asked both the parties to make certain submissions related to the findings

The Securities Appellate Tribunal today adjourned the hearing on Reliance Industries (RIL) appeal challenging Rs 13-crore penalty imposed by Sebi for alleged non-disclosure of a key earnings ratio by the Mukesh Ambani-led conglomerate.

The tribunal will resume hearing on the matter from August 12.

In August last year, Sebi had slapped Rs 13 crore fine on RIL for alleged irregularities in issuance of 12 crore warrants in April, 2007 to its promoters entitling its holders to subscribe to an equivalent number of equity shares of the company.

The company challenged the Sebi order in the tribunal.

Hearing the case today, SAT has asked both the parties to make certain submissions related to the findings and gave time till August 12 to submit replies.

Sebi probe found that RIL had not disclosed key earnings ratio for six consecutive quarters.

It was alleged that the warrants issued in April, 2007 had resulted in diluting the pre-issue paid-up equity share capital of RIL, but the company repeatedly failed to disclose such dilution in earnings for as many as six quarters.

During the hearing, RIL counsel Janak Dwarkadas said the case related to the method of calculation of diluted earnings per share (EPS) as prescribed under accounting standards and was not about non-disclosures.

He further argued that there was "no dilutive effect" in the EPS as the proceeds from the issue were not less than the fair value of the shares issued.

As per Sebi, conversion of warrants into equity shares would necessarily result in reduction in net profit per share as the same amount of profit needs to be distributed to additional equity shares as well upon such conversion.

The market watchdog had said "EPS (basic or diluted) is a vital factor or one of the fundamental tools for the investors while arriving at decision to continue to remain invested in the shares of a particular company."

As per Sebi, RIL had failed to disclose separately the diluted EPS for the quarters ended June 2007, September 2007, December 2007, March 2008, June 2008 and September 2008.