The Securities Appellate Tribunal on Wednesday sought clarifications from market watchdog Securities and Exchange Board of India and Reliance Industries on how new consent settlement norms would affect the ongoing case between the regulator and the company.
The tribunal, which had concluded its hearings on two petitions from RIL on January 6 and reserved its order for an unspecified date, set February 24 for the next hearing.
Since Sebi notified the new consent norms on January 9, after issuing the draft consent norms in May 2012, SAT on Wednesday sought clarifications from the regulator and RIL on the effects of the guidelines on the ongoing case involving the two.
"Before we pronounce the order, we would like to know whether the RIL appeal will hold since new Sebi regulations are retrospective in nature," SAT presiding officer J P Devdhar said, giving time until February 24 to reply.
SAT has been hearing a seven-year-old case of alleged insider trading arising from the merger of Reliance Petroleum with RIL back in 2007.
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 April 20, 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.
Earlier, senior RIL counsel Janak Dwarkadas requested SAT to fix a timetable for hearing RIL's consent application by Sebi once again, which the regulator rejected.
According to him, Sebi was wrong in saying RIL's application could not be dealt with under the consent mechanism as the company had been clearly told on April 15, 2011, that it could apply for a settlement through consent.
Sebi senior lawyer Darius Khambata maintained the regulator could not be compelled to settle a case through consent.
Reliance is fighting two cases with the regulator -- one challenging the new consent mechanism norms that Sebi had issued in May 2012 under which RIL's case was taken out of the settlement process, and the other seeking adjudication proceedings on the alleged insider-trading case dating back to the 2007 sale of Reliance Petroleum shares.
The consent mechanism allows companies and individuals to settle their disputes with Sebi by paying a sum without admission or denial of the alleged wrongdoing, but with disgorgement of any ill-gotten gains.
RIL is also contesting the Sebi decision of May 2012 to keep the case out of the consent mechanism, suggesting the amount involved is too high.
The case dates back to 2007, when RIL, prior to the merger of Reliance Petroleum with itself, allegedly short-sold a 4.1 per cent stake in RPL valued at Rs 4,023 crore (Rs 40.23 billion)
The RPL shares were sold first in the futures market and later in the spot market, covering the share sales in the futures market.
In 2008, Sebi initiated a probe into the matter and in 2010 started quasi-judicial proceedings and found that RIL had booked a profit of Rs 513 crore (Rs 5.13 billion) in the futures segment through this deal worth Rs 4,023 crore.
Sebi argued that the company was aware of the sale of shares and sold futures ahead of that, therefore amounting to insider-trading, and sent a show-cause notice to the company.
RIL challenged the Sebi show-cause notice in December 2010. Following this, Sebi ordered a probe and found that RIL had violated insider-trading norms.
Though RIL moved Sebi for a consent settlement, the regulator did not entertain the application, forcing RIL to move SAT.
Experts say if RIL loses the case, it may end up paying as much as over Rs 1,500 crore (Rs 15 billion), or three times the alleged gains.
At a December hearing, SAT had dismissed RIL's plea against a show-cause notice issued by Sebi, thereby disposing of the three-year-old matter pertaining to the alleged insider trading case.
RIL had claimed that the regulator had not provided sufficient access to the documents on the basis of which the notice was issued.
At an earlier hearing in November last, SAT had suggested that Sebi consider RIL's consent application. Sebi, however, declined to reconsider RIL's application, leaving it to the tribunal to make a decision.
At the December 21 hearing, though Sebi once again agreed to submit the documents to RIL by December 23, the tribunal affirmed that the regulator had already given documents it could rely upon in the case and dismissed RIL's plea.
In the second appeal, RIL challenged Sebi's decision to keep the case out of the consent mechanism.
With the tightening of norms for the consent framework, many cases, including those related to insider trading, are now not eligible to be settled through the route.
SAT has been hearing the insider trading case since 2010.
Presiding officer Devadhar had raised concerns over the frequent adjournments sought by both parties at previous hearings as the case was adjourned as many as 11 times.
On September 25, SAT rejected an intervention petition filed in the case by little-known Urdu daily editor M Furquan, who claimed there could be possible collusion between Sebi and RIL to settle the matter.
On January 3, Sebi published a list of 149 pleas, including 16 from entities related to the RIL Group, that were not found suitable for a consent settlement.
They include applications of RIL itself and that of Manoj Modi, RIL Chairman Mukesh Ambani's close aide.