Supreme Court Grants Relief To Reliance Industries In 2007 RPL Futures Trading Case, Sets Aside SEBI's ₹447 Crore Disgorgement Order

The Supreme Court on Friday (May 29) set aside the ₹447.27 crore disgorgement order imposed by the Securities and Exchange Board of India, being approved by the Securities Appellate Tribunal, on Reliance Industries Ltd (RIL) in connection with alleged manipulative trading in the futures segment of Reliance Petroleum Ltd. (RPL) during November 2007.

Partly allowing the appeal filed by Reliance Industries Limited, a bench of Justice JB Pardiwala and Justice R Mahadevan held that the finding of “fraud” under the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003 (PFUTP Regulations) could not be sustained, observing that the Securities Appellate Tribunal (SAT) had committed an “egregious error” in affirming SEBI's conclusions on manipulation and fraudulent intent.

"We have reached the conclusion that the SAT in its majority judgment committed an egregious error in passing the impugned judgment in so far as the question of fraud under regulations 3 and 4 of the PFUTP Regulations respectively is concerned," the Court observed.

Since the finding of fraud under the PFUTP Regulations was overturned, the judgment authored by Justice Pardiwala held that the consequential disgorgement order directing payment of ₹447.27 crore along with interest at 12% could not survive and directed refund of Rs. 250 Crores deposited by RIL pursuant to earlier interim orders passed during the pendency of the proceedings.

“We direct that the appellant No. 1 be refunded Rs. 250 crores deposited in Investors Protection Fund pursuant to the order of this Court dated 17-12-2020,” the Court directed.

At the same time, the Court upheld SEBI's finding that RIL had violated position limit requirements prescribed under the 2001 SEBI circulars governing derivatives trading, characterising the breach as a technical regulatory violation rather than a fraudulent market manipulation exercise.

"We concur with the observations of the SAT in its majority judgment as regards the penalty to be levied on the appellant No. 1 for alleged violation of the disclosure requirements under 2001 SEBI circular in respect of position limits," the Court clarified.

The Case

The dispute arose from RIL's decision in March 2007 to raise funds by selling approximately 5% of its stake (22.5 crore shares) in its subsidiary Reliance Petroleum Ltd. Between November 1-6, 2007, RIL engaged 12 entities as agents to take net short positions of 9.92 crore shares in the November 2007 RPL Futures at an average price of ₹265.67 per share.

Subsequently, between November 6-29, 2007, RIL sold 20.29 crore RPL shares in the cash segment, realizing approximately ₹4,500 crore. On the expiry day, November 29, 2007, RIL sold 2.25 crore shares in the last ten minutes of trading – with 12 out of 17 orders placed below the Last Traded Price (LTP) – which resulted in the settlement price being fixed at ₹215.25 per share. This gave RIL an additional profit of ₹513 crore from the futures segment.

SEBI alleged that this was a well-planned fraudulent scheme where RIL used the principal-agent model to circumvent position limits and manipulated the settlement price by depressing the cash market price in the last ten minutes of trading.

According to SEBI, the depressed settlement price enabled RIL to earn an additional profit of approximately ₹513 crore from its short futures positions.

SEBI treated the arrangement as a pre-planned manipulative scheme involving the use of front entities to circumvent position limits and influence settlement prices in the derivatives market.

Aggrieved by the SAT's order affirming the SEBI's decision, the RIL appealed to the Supreme Court.

Cause Title: RELIANCE INDUSTRIES LIMITED AND ORS. Versus THE SECURITIES AND EXCHANGE BOARD OF INDIA (with connected case)

Citation : 2026 LiveLaw (SC) 564

Click Here To Read/Download Judgment

Appearance:

For Appellant(s) : Mr. Harish N Salve, Sr. Adv. Mr. Ritin Rai, Sr. Adv. Mr. K. R. Sasiprabhu, AOR Mr. Amey Nabar, Adv. Mr. Aditya Swarup, Adv. Ms. Swati N Jain, Adv. Mr. Vishnu Sharma A S, Adv. Ms. Ritika Sinha, Adv. Mr. Yasharth Misra, Adv. Mr. Ribhav Pande, Adv. Ms. Namrata Saraogi, Adv. Mr. Madhav Agarwal, Adv.

For Respondent(s) : M/S. K Ashar & Co., AOR Mr. Arvind P. Dattar, Sr. Adv. Mr. Pratap Venugopal, Sr. Adv. Mr. Abhishek Singh, Adv.