Supreme Court Sets Aside Rs 447 Crore Disgorgement Order Against Reliance Industries

The Supreme Court of India on Friday set aside an order that had directed Reliance Industries Ltd (RIL) to disgorge Rs 447.27 crore in a long running dispute linked to trading in Reliance Petroleum Ltd (RPL) shares in 2007 , granting partial relief to the company in a closely watched securities regulation case.

A bench comprising Justices JB Pardiwala and R Mahadevan partly allowed the appeal filed by Reliance Industries Ltd , which had challenged a November 2020 judgment of the Securities Appellate Tribunal (SAT) . The SAT had earlier upheld a 2017 order of the Securities and Exchange Board of India (SEBI) concerning alleged irregularities in the sale of RPL shares during November 2007.

The dispute arose from SEBI’s findings that Reliance Industries Ltd had allegedly made undue gains by influencing price movements in RPL shares and benefiting from related positions in the derivatives segment. SEBI had imposed a disgorgement order of Rs 447.27 crore , holding that the company violated provisions under the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003, along with disclosure norms under SEBI circulars on position limits.

In its detailed 136 page verdict, the Supreme Court held that the SAT’s majority decision had committed what it described as an “egregious error” in its finding of fraud under the PFUTP regulations. The court observed that the legal threshold for establishing fraud had not been correctly applied and therefore the finding could not stand.

However, the bench also agreed with certain observations of the tribunal regarding violation of disclosure requirements under SEBI’s regulatory framework. It held that while procedural lapses could be sustained, the charge of fraud and consequential penalties, including disgorgement, were not legally justified in this case.

The court therefore set aside the SAT order to the extent it upheld the fraud finding and the disgorgement direction. As a result, Reliance Industries Ltd has been relieved of the obligation to pay the Rs 447.27 crore amount.

The bench also directed the refund of Rs 250 crore earlier deposited in the Investors Protection Fund , noting that the interim deposit was made during the pendency of the appeal. The final recovery of any balance amount, along with interest, had remained subject to the outcome of the case.

The ruling brings partial closure to a nearly two decade old dispute that has moved through multiple regulatory and judicial forums, involving complex questions on market conduct , disclosure compliance , and interpretation of securities law governing trading practices.