Supreme Court Sets Aside Fraud Findings, ₹447-Crore Disgorgement Order Against Reliance In RPL Futures Trading Case
Kirit Singhania
29 May 2026 11:06 AM IST
The Supreme Court on Friday partly allowed Reliance Industries Limited's appeal in the Reliance Petroleum Limited (RPL) futures trading case, setting aside findings of fraud and market manipulation, quashing a ₹447.27 crore disgorgement order, and directing the refund of ₹250 crore deposited by the company.
However, the Court upheld the finding that Reliance had violated disclosure requirements relating to position limits under a 2001 Securities and Exchange Board of India (SEBI) circular and affirmed the one-year restraint from dealing in equity derivatives imposed in connection with that violation.
A Bench of Justices J.B. Pardiwala and R. Mahadevan held,
“For all the foregoing reasons, we have reached the conclusion that the SAT in its majority judgment committed an egregious error in passing the impugned judgment insofar as the question of fraud under Regulations 3 and 4 of the PFUTP Regulations respectively is concerned. However, we concur with the observations of the SAT in its majority judgment as regards the penalty to be levied on Appellant No. 1 for alleged violation of the disclosure requirements under the 2001 SEBI Circular in respect of position limits.”
Setting aside the fraud findings, the Court observed:
“We are left with no other option but to set aside the impugned judgment and order dated 11.08.2020 passed by the SAT insofar as the finding on fraud under the PFUTP Regulations is concerned.”
The bench further set aside the disgorgement order and directed the refund of ₹250 crore deposited by the appellant.
“In the result, the appeal partly succeeds and is hereby allowed. Accordingly, the order of disgorgement is also set aside. We direct that Appellant No. 1 be refunded ₹250 crore deposited in the Investor Protection Fund pursuant to the order of this Court dated 17.12.2020. We uphold the penalty levied by the WTM and SAT in its majority judgment as regards the violation of the 2001 SEBI Circular.”
Background
The dispute arose from enforcement proceedings initiated by the Securities and Exchange Board of India (SEBI) against Reliance Industries Ltd and 12 connected entities over alleged manipulative trading in shares and futures contracts of Reliance Petroleum Limited (RPL) in November 2007.
SEBI alleged that RIL, through connected entities acting as agents, built massive short positions in RPL futures while simultaneously selling large quantities of RPL shares in the cash market to depress settlement prices and earn unlawful gains.
The regulator ultimately directed disgorgement of ₹447.27 crore along with 12% annual interest and restrained the entities from dealing in equity derivatives for one year.
According to SEBI, RIL had resolved in March 2007 to raise funds for its projects and later decided to sell around 5% of its holding in RPL, amounting to nearly 22.5 crore shares. Between November 1 and 6, 2007, the connected entities allegedly took aggregate short positions of 9.92 crore shares in RPL futures contracts.
Thereafter, RIL sold more than 20 crore RPL shares in the cash segment, including about 2.25 crore shares in the final minutes of trading on the expiry day. SEBI alleged that these trades artificially depressed the settlement price of the futures contracts, resulting in unlawful gains of about ₹513 crore.
On appeal, the Securities Appellate Tribunal (SAT) delivered a split verdict. Justice Tarun Agarwala, the Presiding Officer, held that the transactions formed part of a genuine hedging strategy linked to RIL's proposed sale of RPL shares and that breach of position limits, by itself, did not establish fraud or market manipulation under the PFUTP regulations.
However, the other two members disagreed. By a 2:1 majority, SAT upheld SEBI's findings that RIL had employed a manipulative scheme through connected entities to take large futures positions while influencing the settlement price through cash-market trades. The majority consequently sustained SEBI's findings of fraud and market manipulation under the PFUTP Regulations and upheld the disgorgement direction against the company.