SC dismisses Sebi’s ₹25 crore penalty plea against Mukesh Ambani in RPL share manipulation case

The Supreme Court on Monday dismissed a plea by the Securities and Exchange Board of India (Sebi) to impose a ₹25 crore penalty on Mukesh Ambani, chairman and managing director of Reliance Industries Ltd (RIL), over alleged share manipulation involving Reliance Petroleum Ltd (RPL) in November 2007. 

Reliance Petroleum was merged into RIL in 2009.

"There is no question of law raised in the case. Dismissed," the court said.

A two-judge bench of Justices J.B. Pardiwala and R. Mahadevan agreed to hear Sebi's broader case against RIL on 2 December but declined to hold Ambani personally accountable for the alleged actions. 

Sebi had challenged a Securities Appellate Tribunal (SAT) order from December 2023, which had overturned penalties totalling ₹70 crore on RIL, Ambani, Navi Mumbai SEZ, and Mumbai SEZ.

The Supreme Court upheld SAT's decision, agreeing that the penalties should be set aside. The court supported Sebi's pre-2019 interpretation of Section 27 of the Sebi Act, which did not impose vicarious liability on individuals such as directors unless they were directly involved in or aware of corporate violations. This interpretation changed with a March 2019 amendment, introducing vicarious liability for directors and key personnel.

Before the amendment, vicarious liability—which holds individuals responsible for company actions—was not recognized by Sebi unless direct involvement or knowledge was proven. After the amendment, directors, key managerial personnel, and other officers could be held vicariously liable for company violations. 

However, SAT clarified that this amendment could not be applied retroactively, shielding Ambani from liability for the 2007 case.

This case stems from Sebi’s investigation into RPL trading activities in November 2007. Sebi alleged that RIL manipulated the market by appointing agents to take short positions in RPL futures while simultaneously trading RPL shares in the cash market. According to Sebi, RIL’s trades in the final minutes of trading on 29 November 2007 caused a sharp decline in RPL’s price, impacting the futures settlement. Sebi held Ambani, as RIL’s principal officer, responsible for these actions.

Sebi also accused Navi Mumbai SEZ and Mumbai SEZ of financing the alleged scheme by providing funds to the agents, implicating them as accomplices.

SAT overturned these penalties, criticizing Sebi for the 10-year delay in issuing show-cause notices. SAT ruled that Sebi should have initiated adjudication proceedings concurrently with Section 11B proceedings rather than waiting for the latter to conclude.

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The tribunal also found that Sebi had violated principles of natural justice by withholding key documents from Navi Mumbai SEZ and Mumbai SEZ. It deemed the allegations of complicity speculative, lacking concrete evidence, and dismissed the charges.