Mukesh Ambani fined 15 million rupees for SEBI; here is everything you need to know about the 13 year old case

Reliance Industries Chairman Mukesh Ambani started his new year with a fine of 15 million rupees for himself and 25 million rupees for his oil-to-telecommunications conglomerate for ‘manipulative trading’ conducted with shares of Reliance Petroleum Limited in 2007. The capital markets regulator, Securities and Exchange Board of India (SEBI), in a 95-page request, said that Mukesh Ambani, as RIL’s CEO, was responsible for the company’s manipulation activities. Together with Mukesh Ambani and RIL, SEBI also imposed a fine of Rs 20 crore on Navi Mumbai SEZ and Rs 10 crore on Mumbai SEZ.

What is the case about?

The investigation carried out by SEBI related to the negotiation of the license of Reliance Petroleum Limited (RPL), which merged with RIL in 2009. The RIL Board had approved in March 2007, among other things, the operating plan for the year 2007-08 and the resource requirements for the next two years – approximately Rs. 87,000 crore. After this, RIL decided to sell around 5% of its stake in RPL.

“Subsequently, RIL acknowledged that it appointed 12 agents, between October 2007 and November 2007, to carry out transactions in the RPL futures of November 2007 (settlement period from November 1 to November 29, 2007) on its behalf. ”Said the SEBI order. It further added that the 12 agents appointed by RIL took short positions in the F&O Segment on behalf of RIL, while RIL transacted in RPL shares in the cash segment.

Between that period, SEBI observed that RIL’s short position in the F&O Segment consistently exceeded the proposed sale of shares in the Cash Segment. “On November 29, 2007, RIL sold a total of 2.25 million shares in the cash segment during the last 10 minutes of trading, causing RPL’s share prices to drop, which also reduced the settlement price of the RPL November futures in the F&O segment. RIL’s total outstanding position of Rs 7.97 crore in the F&O segment was settled in cash at this depressed settlement price, generating profits on those short positions. Said profits were transferred by the agents to RIL according to a prior agreement, ”said SEBI.

Improper benefits

SEBI said it observed that “RIL had entered into a well-planned operation with its agents to capture open interest in RPL futures and gain undue profit from the sale of RPL shares in the cash and futures segments and to dispose of a large number of RPL shares in the cash segment during the last ten trading minutes on the settlement day, resulting in a drop in the settlement price. “The order noted that all 12 entities made a profit of Rs 513.12 crore in the derivatives segment of RPL during the month of November 2007.

The order also noted that general investors were unaware that the entity behind the F&O segment operations was RIL. “The execution of the aforementioned fraudulent operations affected the price of RPL securities in the Cash and F&O segments and hurt the interests of other investors,” he said.

In early 2017, the market regulator had ordered Mukesh Ambani’s company and some other entities to return more than Rs 447 million in the RPL case. Later, in November 2020, the Securities Appeal Court (SAT) had dismissed the company’s appeal against the order.