Tribunal sets aside Sebi's Rs 13-cr fine on RIL

The Securities Appellate Tribunal today set aside a penalty of Rs 13 crore imposed by Sebi on corporate giant Reliance Industries Ltd (RIL) and asked the markets regulator to consider the matter afresh.
The fine was imposed by the regulator last year on charges of violation of the Listing Agreement by RIL with regard to disclosure and computation of a key earnings ratio by the company.
The latest direction follows another SAT ruling earlier this month wherein the tribunal had set aside a penalty of Rs 11 crore imposed on RIL group firm Reliance Petroinvestments Ltd and had asked the regulator to pass order within three months after hearing the matter afresh.

The latest case, in which Sebi passed its penalty order on August 8, 2014, relates to a probe by the capital markets regulator in an over seven-year old matter involving alleged irregularities in issuance of 12 crore warrants by Mukesh Ambani-led RIL to its promoters entitling its holders to subscribe to equivalent number of equity shares of RIL.
After hearing an appeal filed by RIL against this order, the SAT today said one of the grounds on which the appeal is filed is that the impugned order has taken into account all 12 crore shares relatable to the warrants, in computing DEPS (Diluted Earnings Per Share) for six quarters in question.

"In view of the language of Accounting Standard (AS) 20, this does not appear to be correct. We therefore set aside the impugned order and remand the matter back for de novo consideration," SAT said.

As per Sebi's order in the case, it was alleged that this issuance in April 2007 had resulted in diluting the pre-issue paid-up equity share capital of RIL, but the company repeatedly failed to disclose a key earnings ratio for as many as six quarters.
Subsequently, Sebi began adjudication proceedings to probe the alleged violation of relevant clauses of the Listing Agreement and the Securities Contracts (Regulation) Act (SCRA) for not disclosing to stock exchanges the DEPS as prescribed for the quarterly and annual disclosures, Sebi had said.

Sebi 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 or invest in the shares of a particular company."
The regulator further said RIL "under an obligation to disclose separately the DEPS for the quarters ended June 2007, September 2007, December 2007, March 2008, June 2008 and September 2008, which the noticee had failed to do so".
"In view of aforesaid observations, facts and records of the case", Sebi said, the company was in violation of the relevant provisions of the Listing Agreement and the SCRA and therefore it was liable to a penalty.

Noting that a specific quantum of any direct or indirect unfair gain made by RIL and the loss caused to the investors were not available on records, Sebi said that "the fact cannot be ignored that millions of shareholders/investors were deprived of correct disclosures about DEPS."
"As regards to the repetitive nature of default, as observed above that the Noticee had failed to disclose the DEPS repetitively for the six quarters. Hence, an appropriate penalty needs to be imposed upon the Noticee, taking into account the aforesaid gravity of the violations committed," Sebi had said.
Accordingly, the regulator has decided to impose a penalty of Rs 1 crore for violation of Listing Agreement and of another Rs 12 crore for violating the SCRA provision.