SC rejects Reliance plea over ₹30 lakh fine for not disclosing Jio-FB deal

In June 2022, Sebi imposed a penalty of ₹30 lakh on Reliance Industries for not making a prompt clarification to stock exchanges regarding the Jio-Facebook deal

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The Supreme Court on Tuesday dismissed Reliance Industries' appeal against the Securities Appellate Tribunal (SAT) order that upheld ₹30 lakh penalty for not disclosing the Reliance Jio deal with Facebook, according to a report by Bar and Bench.

 

In June 2022, the Securities and Exchange Board of India (Sebi) imposed a penalty of ₹30 lakh on Reliance and the company's two compliance officers -- Savithri Parekh and K Sethuraman -- for not making a prompt clarification to stock exchanges regarding the Jio-Facebook deal.

 

The company and officials were charged with violating the Prohibition of Insider Trading (PIT) Regulations.

What did the court say?

A Bench of Chief Justice of India Surya Kant and Justice Joymalya Bagchi noted that the issue dealt with by Sebi and SAT is substantially a question of fact, giving rise to no substantial question of law to be considered by the court.

What is the case about?

Sebi had said that the ₹43,574-crore deal was almost finalised in March 2020. The companies signed binding transaction documents in April 2020, and Reliance formally announced the investment a couple of days later.

 

However, Reuters, Financial Times, and several other media outlets had already reported that Facebook was close to acquiring a 10 per cent stake in Jio in March. The news had caused Reliance’s shares to rise sharply.

 

According to Sebi, the fine was to be paid within 45 days. However, Reliance moved SAT to appeal against the fines. In May this year, SAT dismissed Reliance's plea. The tribunal said that by late February 2020, the deal details were already clear and serious enough to affect the company's share price.

 

The way the market reacted showed that this information was important. It also said that news leaks do not count as 'public information' unless the company itself confirms them. So, once the leak happened, Reliance should have issued a proper clarification. Because it did not, the tribunal agreed with the penalty.