SAT Overturns SEBI Order Against Mukesh Ambani In Manipulative Trading Case

The Securities Appellate Tribunal has overturned the market regulator's 2021 order against Mukesh Ambani and his group's Mumbai and Navi Mumbai special economic zones in the case involving alleged manipulative trading in shares of Reliance Petroleum Ltd.

The appellate tribunal rejected the finding by the adjudicating officer that Ambani, chairman of Reliance Industries Ltd., and Navi Mumbai SEZ were alleged to have prior knowledge of the manipulative trades by RIL.

The AO, according to the order of the Securities and Exchange Board of India, had concluded that both parties were fully aware that the funds provided to Vinamra, a third party, were intended for financing the alleged manipulative trades.

The appellate disagreed citing following reasons:

• The facility agreement, a key document, was executed on Aug. 04, 2007, and Sept. 22, 2007.

• The alleged manipulative scheme by RIL, involving the decision to sell RPL shares, was initiated around Oct. 30, 2007.

• By Oct. 30, 2007,  Navi Mumbai SEZ had already advanced Rs 625 crore, and Mumbai SEZ had loaned Rs 45 crore.

• The court concluded that it was not possible for Navi Mumbai SEZ and Mumbai SEZ to have prior knowledge of RIL's actions at the time of executing the facility agreement.

• The facility agreement and the agency agreement, executed two months later, are deemed by the court to be wholly unconnected.

• The court asserted that the execution of the facility agreement was not linked to the subsequent agency agreement.

• Therefore, the AO's inference that both agreements could be read together and suggested prior knowledge was deemed untenable.

In summary, the court rejected the finding that Ambani and Navi Mumbai SEZ had prior knowledge of the alleged manipulative trades, emphasising the temporal disconnect between the facility agreement and the actions of RIL. The court ruled in favor of overturning SEBI's order.

In January 2021, SEBI imposed penalties of Rs 25 crore and Rs 15 crore, respectively, on Reliance Industries and its chairman. Additionally, Navi Mumbai Special Economic Zone was directed to pay Rs 20 crore.

The penalties were related to alleged irregularities in the sale and purchase of Reliance Petroleum shares in both the cash and futures segments in November 2007.

Challenging the SEBI order, Ambani, Reliance Industries and other entities involved had approached the Securities Appellate Tribunal.