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The Bench said it had no other option but to set aside the November 5, 2020 order passed by the SAT concerning the finding of fraud under the PFUTP Regulations. File | Photo Credit: The Hindu

The Supreme Court on Friday (May 29, 2026) provided relief to Reliance Industries Limited (RIL) by overturning findings of fraud arrived at by the Securities and Exchange Board (SEBI) in connection with Reliance Petroleum Ltd. futures trading of November 2007. The court also set aside the market regulator’s direction to RIL to disgorge ₹447 crore.

A Bench led by Justice J.B. Pardiwala, in a judgment, concluded that the Securities Appellate Tribunal (SAT) committed an “egregious error” in its finding of fraud against RIL under the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations or the SEBI (PFUTP) Regulations.

“In our considered opinion, the agreements entered into by and between the appellant no. 1 (RIL) and the 12 entities were not a device used for fraud and manipulation… In our view, the PFUTP Regulations cannot be applied to the sole circumstance of the appellant no. 1 using 12 agency agreements to take excess position limits. It was necessary for the respondent [SEBI] to prove whether the manner in which these agency agreements were utilised was fraudulent or not,” Justice Pardiwala said.

The court said the threshold for ‘fraud’ under the PFUTP Regulations was very high.

Justice Pardiwala said the market regulator used the wrong method to calculate RIL’s share of the market. SEBI should have calculated the share against the entire derivatives market for that stock. The court said there was no evidence that Reliance had any fraudulent intent or was attempting to corner the market merely because it held 40.10% open interest.

“We direct that the appellant no. 1 [RIL] be refunded ₹250 crore deposited in the Investor’s Protection Fund pursuant to the order of the Supreme Court on December 17, 2020,” the court ordered.

The SAT, by a 2:1 majority order, had dismissed RIL’s appeal against the SEBI’s March 2017 order relating to the sale of RPL shares in November 2007.

“However, we concur with the SAT’s observations in its majority judgment as regards the penalty to be levied on the appellant number 1 (RIL) for violating the disclosure requirements under the 2001 SEBI circular concerning position limits… In the result, the appeal partly succeeds and is hereby partly allowed. Accordingly, the order of disgorgement is also set aside,” the Bench, also comprising Justice R. Mahadevan, said in its 136-page verdict.

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