In a significant ruling for India’s securities markets, Hon’ble Supreme Court of India has set aside the findings of market manipulation and fraud against Reliance Industries Limited (RIL) arising from its 2007 sale of stake in Reliance Petroleum Limited (RPL). The judgment overturns earlier findings of the Securities and Exchange Board of India (SEBI) and the Securities Appellate Tribunal (SAT), while directing SEBI to refund the disgorgement amount deposited by RIL during the pendency of the proceedings.
The dispute centred on RIL’s derivatives trading arrangements ahead of the stake sale, which SEBI had alleged amounted to fraudulent and manipulative conduct by circumventing position limits and influencing settlement prices. The Supreme Court of India, however, held that a breach of position limits, by itself, does not establish fraud or market manipulation and emphasised that hedging remains a legitimate risk-management tool.
In this context, Reuters, in an article titled “𝘐𝘯𝘥𝘪𝘢’𝘴 𝘵𝘰𝘱 𝘤𝘰𝘶𝘳𝘵 𝘱𝘳𝘰𝘷𝘪𝘥𝘦𝘴 𝘳𝘦𝘭𝘪𝘦𝘧 𝘵𝘰 𝘙𝘦𝘭𝘪𝘢𝘯𝘤𝘦 𝘪𝘯 2007 𝘴𝘦𝘤𝘶𝘳𝘪𝘵𝘪𝘦𝘴 𝘮𝘢𝘳𝘬𝘦𝘵 𝘧𝘳𝘢𝘶𝘥 𝘤𝘢𝘴𝘦” authored by Ms. Jayshree P Upadhyay, featured insights from Mr. Sumit Agrawal, Senior Partner at Regstreet Law Advisors and former SEBI officer. Commenting on the implications of the ruling, Mr. Agrawal observed:
“𝘊𝘰𝘯𝘤𝘦𝘯𝘵𝘳𝘢𝘵𝘪𝘰𝘯 𝘰𝘧 𝘱𝘰𝘴𝘪𝘵𝘪𝘰𝘯𝘴, 𝘢𝘨𝘨𝘳𝘦𝘴𝘴𝘪𝘷𝘦 𝘵𝘳𝘢𝘥𝘪𝘯𝘨 𝘴𝘵𝘳𝘢𝘵𝘦𝘨𝘪𝘦𝘴, 𝘰𝘳 𝘦𝘷𝘦𝘯 𝘷𝘪𝘰𝘭𝘢𝘵𝘪𝘰𝘯𝘴 𝘰𝘧 𝘵𝘳𝘢𝘥𝘪𝘯𝘨 𝘯𝘰𝘳𝘮𝘴 𝘮𝘢𝘺 𝘪𝘯𝘷𝘪𝘵𝘦 𝘳𝘦𝘨𝘶𝘭𝘢𝘵𝘰𝘳𝘺 𝘤𝘰𝘯𝘴𝘦𝘲𝘶𝘦𝘯𝘤𝘦𝘴, 𝘣𝘶𝘵 𝘵𝘩𝘦𝘺 𝘢𝘳𝘦 𝘯𝘰𝘵, 𝘣𝘺 𝘵𝘩𝘦𝘮𝘴𝘦𝘭𝘷𝘦𝘴, 𝘴𝘶𝘧𝘧𝘪𝘤𝘪𝘦𝘯𝘵 𝘵𝘰 𝘦𝘴𝘵𝘢𝘣𝘭𝘪𝘴𝘩 𝘮𝘢𝘳𝘬𝘦𝘵 𝘢𝘣𝘶𝘴𝘦.”
The judgment is likely to be closely examined for its treatment of the distinction between regulatory non-compliance and fraudulent market conduct and the evidentiary threshold required to establish market manipulation under securities laws.
A copy of the news article is attached herewith.
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