Share acquisition case: Sebi, Reliance Industries spar at Supreme Court


Market regulator Sebi and Reliance Industries (RIL) on Thursday strongly countered each other in the Supreme Court as they sought remedy in a case concerning alleged irregularities by the latter in connection with acquisition of its own shares between 1994 and 2000.

RIL wants Sebi to share certain documents that it thinks will exonerate it and its 108 promoters in the case. The company believes that these documents would negate the allegations of wrongdoing in the acquisition of shares and this would have a vital bearing on the criminal case being filed by Sebi.

Taking “grave exceptions” to the Sebi’s affidavit that “RIL is blowing hot and cold”, senior counsel Harish Salve, appearing for RIL, questioned how the priniciple of litigation privilege, which is available to private parties, can apply to Sebi. He said that “privilege cherry-picking policy is not allowed” and the investigations should be fair and transparent. “There is an info asymmetry. The judges and auditor’s findings have flipped. Prosecuting a listed entity is the most serious thing to do. They (Sebi) deem to be a public prosecutor (PP), but a PP cannot be adversarial to an accused,” Salve argued.

Denying any allegations of round tripping, the senior counsel said that its incorrect on the part of a statutory regulator to say that RIL is “taking convenient positions to frustrate the process of law so as to cause delay in the criminal proceedings.”

Earlier, rejecting Reliance’s right to seek documents, Sebi told the apex court that the company’s only object is to frustrate the process of the law by pursuing ‘frivolous litigation’ and causing unnecessary delay in the criminal proceedings initiated against it and its promoters.

Chartered accountant S Gurumurthy had filed a complaint with Sebi in 2002 alleging fraud and irregularities by RIL, its associate companies and their directors/ promoters, including Mukesh Ambani and his wife, Nita; Anil Ambani and his wife, Tina; and 98 others in the issue of two preferential placement of non-convertible debentures in 1994.

“RIL is seeking three documents, which include two legal opinions by SC former judge BN Srikrishna and the opinion of former ICAI president YH Malegam, who was assisting him (in examining the alleged irregularities) and the brief for opinion. The opinions are part of the privilege contained in terms of Section 129 of the Indian Evidence Act 1872 and hence immune from production before any proceedings,” Sebi told the apex court.

Stating that RIL has been raising similar demands even in parallel proceedings, it said that the Ambani company is “merely blowing hot and cold in various forums and taking inconsistent pleas and engaging in forum shopping.”

“…at every point of time the accused (RIL) not only adopted every possible tactic to avoid submitting to the regulatory overview of Sebi but procrastinating the conclusion of these proceedings on one ground or the other and before every possible forum,” the market regulator said in its reply to the RIL’s appeal.RIL had moved the SC against the the Bombay high court’s March 28 order that refused to grant any relief for production of material gathered by the regulator. The high court had said it would hear Sebi’s appeal against a Sebi special court decision along with RIL’s objections to the criminal case.

In its reply to RIL’s appeal, Sebi told a bench, led by Chief Justice NV Ramana, that “RIL cannot assert its right to seek documents contrary to the binding judgment by the Bombay HC and the procedure provided in Code of Criminal Procedure (CrPC) which will arise only after taking cognisance and issuing process u/s 208 of the CrPC.”

“There were no wrongdoings of round tripping by the company as Sebi’s Takeover Code came much later after the share transactions were over. Where is the legal privilege which Sebi is claiming?” Salve asked while prompting the CJI to have a look at all the reports/documents with Sebi.

The senior counsel said that Sebi had disclosed Justice Srikrishna’s initial opinion that favoured the company, but the market regulator was now denying his second opinion which has given a contrary finding.

“If the auditor’s report and other documents are exonerating the company, why is Sebi badgering this company. Its allegations will damage the reputation of a listed company,” Salve said, while admitting to some of the “technical breaches.”

“Someone slipped there. Some reporting requirements were not met. We were ready to settle the matter by paying penalty of Rs 10-20 lakh, but Sebi asked for `3,000 crore. Where is the question of paying so much on this count,” Salve said.