RIL’s Plea for Consent Order in ‘Insider Trading’ Case Rejected

Sebi issues supplementary show-cause notice to RIL, will go ahead with inquiry in insider trading     Capital market regulator Sebi has rejected a third attempt by Reliance Industries (RIL), the country's largest private sector firm, for an out-of-court settlement of insider trading charges. The regulator has also issued a supplementary show-cause notice, incorporating new findings, to RIL on the same matter, sources told ET.  Sebi has completed its investigation into trades carried out in November 2007 by entities allegedly linked to RIL. It is learnt that the investigation report has been submitted to the Sebi board and the regulator is going ahead with its inquiry proceedings on the matter.  An email sent to an RIL spokesman seeking the company's response went unanswered till the time of going to press. Sebi is probing the sale of Reliance Petroleum (RPL) stock futures in the first week of November 2007, days before parent RIL began trimming its stake in the refining arm. The sellers were not well-known market players, but were allegedly located at the address of some RIL group companies, according to information provided to Sebi by unknown complainants.  The regulator's investigations revealed that RIL made a profit of . 500 crore from the sale of Reliance Petroleum shares. RIL has been trying to settle the case through consent orders but its proposals have been rejected twice by the regulator, which felt the amount put up by the company was inadequate. In the first consent application, RIL offered to pay a penalty of . 3 crore while on the second occasion it offered to pay less than . 10 crore as penalty, which was unacceptable to the regulator.  Consent orders are similar to negotiated settlements between the market regulator and alleged securities law violators. The settlement terms often involve monetary penalty and voluntary debarment from the capital markets without admitting or denying guilt. In May, the regulator came out with new rules which exclude serious offences such as insider trading, front-running and serious frauds from the consent process.  Meanwhile, the office of the Chief Information Commissioner sought details of the case from Sebi after a petition filed by RTI activist and lawyer Arun Agarwal. Sebi has so far refused to share the details.  The court has observed that RIL should be given an opportunity to present its case as the information sought by the RTI applicant relates to them. RIL, in its response, has to state that the information sought is not in public interest. On Thursday, a Bombay HC division bench comprising Justices DY Chandrachud and AA Sayed directed RIL to file its reply by January 14, while the court will hear the case on January 23. Senior counsel Janak Dwarkadas, appearing on behalf of RIL, sought time to file an affidavit before the court.  The case pertains to the ongoing legal tussle between Sebi and Agrawal, who sought information from the regulator about the case and names of individuals, partners, directors and major shareholders involved. Early this month, the HC directed that RIL be made a party to the case. The bench expressed the view that the party should be given an opportunity to be heard before passing any order.