NEW DELHI: On Monday, the Supreme Court of India dismissed an appeal by the Securities and Exchange Board of India (SEBI), which had challenged a ruling by the Securities Appellate Tribunal (SAT) that annulled penalties imposed on Mukesh Ambani, the chairman of Reliance Industries Limited (RIL). The penalties were related to allegations of stock manipulation involving Reliance Petroleum Limited (RPL) in 2007.
The bench, consisting of Justices JB Pardiwala and R Mahadevan, stated that there was โno question of lawโ raised in SEBIโs appeal against Ambani, effectively rejecting the petition. However, the Court did agree to review SEBIโs appeal concerning SATโs decision to grant relief to Reliance Industries Limited. The Court has scheduled a hearing for December 2, focusing on the aspect of the case involving the relief granted to RIL.
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Senior Advocate Arvind Datar, representing SEBI, had urged the Court to issue a notice regarding the appeal, emphasizing the relevance of the โvicarious liabilityโ of a managing director. He pointed to conflicting rulings by SAT in similar cases as justification for the review. Despite these arguments, the Supreme Court declined to reopen the case concerning Ambani personally.
The case dates back to December 2023 when SAT overturned a penalty order by SEBI against Ambani and RIL. The penalties arose from allegations that Ambani had manipulated the stock price of Reliance Petroleum Limited (RPL) during a 5% stake sale in the company. This stake sale was part of the broader restructuring process when RPL merged with RIL in 2009. At the time, SEBI had imposed a fine of โน25 crore on RIL, โน15 crore on Ambani, โน20 crore on Navi Mumbai SEZ, and โน10 crore on Mumbai SEZ. The charges were based on claims that Ambani and others were responsible for manipulating RPLโs stock.
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SATโs decision, however, found Ambani free from liability. The tribunal concluded that there was no evidence to suggest that Ambani was directly involved in the stock trades, noting that board meeting records showed the transactions were carried out by others without his knowledge. SATโs ruling emphasized that corporate officers should not be held accountable for every infraction involving their companies unless there is direct involvement or clear evidence of misconduct.
The case remains a key one for corporate governance and regulatory actions in India, highlighting the complexities of vicarious liability in corporate structures.
