The Securities Appellate Tribunal -SAT dismissed an appeal filed by Reliance Industries in the company's dispute with SEBI regarding alleged contravention of FUTP regulations ahead of the 2007 merger between Reliance Petroleum and RIL

The Securities Appellate Tribunal (SAT) on Monday dismissed an appeal filed by Reliance Industries Ltd (RIL) against a Rs11 crore penalty order passed by market regulator Securities and Exchange Board of India (SEBI). The market regulator had imposed the fine on RIL, the country's largest private company, for alleged violations of insider trading norms and contravention of its regulations on Fraudulent and Unfair Trade Practices (FUTP).

The SAT has been hearing almost over seven-year-old case of alleged insider trading arising from the merger of Reliance Petroleum Ltd (RPL) with RIL back in 2007. The dispute relates to alleged contravention of the FUTP regulations ahead of the 2007 merger between RPL and RIL.

Earlier in January 2014, the SAT sought clarification from SEBI and RIL on how new consent settlement norms would affect the ongoing case between the regulator and the company.

In May 2012, SEBI tightened the regulations for settlement through consent framework, as a result of which many cases including those related to insider trading, cannot be settled through this mechanism. SEBI notified a stricter set of consent norms that exclude settlement of serious offences such as insider trading, front-running, violations of listing disclosure norms and illegal pooling of money, among others.

The new norms are retrospective and apply to all cases from 20 April 2007. SEBI also excluded all pending cases from the consent settlement process and made it mandatory for an affected party to file for consent within 60 days of receiving a SEBI show-cause notice.

Reliance had said that when the impugned trades had taken place the new SEBI norms on insider trading were not in force. The SAT said that the norms were passed retrospectively and as such did not leave room for RIL to challenge the SEBI order.

Earlier, SAT had rejected RIL's plea to settle the case through consent orders thrice. The SEBI order rejecting the RIL plea to settle through Consent Orders noted the violations as “Alleged violation of regulation 3 of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 in the matter of Indian Petrochemicals Corp Ltd.”

SEBI on 3 January 2013 made public a list of 149 consent applications, including 16 from various entities related to RIL group, which it had found unsuitable for settlement through consent process.

 As per SEBI, these 149 consent applications were rejected as they were not found to be in consonance with the revised guidelines. SEBI said that proceedings in these cases will continue in accordance with law.

These include 13 applications from various entities in a case involving alleged violation of SEBI regulations for “Prohibition of FUTP” in a matter of RIL’s erstwhile subsidiary Reliance Petroleum.

Besides, there are three applications related to alleged violation of “Prohibition of Insider Trading Regulations” in the matter of another erstwhile RIL group company—IPCL—which used to be a government-owned company and was later acquired by Mukesh Ambani-led group as part of a disinvestment exercise.

Both the companies, Reliance Petroleum and IPCL, used to be separately listed entities, but were later acquired by RIL and got delisted from the stock exchanges. The merger process for RPL was completed in 2009.