EXPLAINED | What Is Reliance Stock Allotment Case? Here's A Timeline Of The Controversy
Reliance has also written a letter to the registrar of the Supreme Court, seeking an urgent hearing of the matter before Chief Justice of India
Indian conglomerate Reliance Industries (RIL) has moved Supreme Court and filed a contempt petition against capital market regulator Securities and Exchange Board of India (Sebi) alleging ‘wilful disobedience’, The Economic Times published on Monday.
According to the report by ET, Reliance filed the petition regarding an order of the apex court that had directed the Sebi to give the company access to certain documents in a two-decade-old stock allotment case.
The Supreme Court on August 5 had asked the Sebi to share copies of the first and second opinions given by Justice (retired) B N Srikrishna and the report of Y H Malegam to RIL. After the Supreme Court’s ruling, RIL wrote twice to Sebi seeking copies of the three documents. The Sebi responded saying it was seeking legal advice from its senior counsel, according to agency reports.
The move comes at a time when the Sebi plans to file a review petition in the apex court against the August 5 order that had ruled in favour of the company on accessing the relevant documents.
Reliance has also written a letter to the registrar of the Supreme Court, seeking an urgent hearing of the matter before Chief Justice of India N V Ramana on August 22.
A snapshot of the case
This case dates back to 1994 regarding certain alleged share transactions of Reliance Industries. Based on a complaint filed by S Gurmurthy in 2002, the Sebi began a probe into the irregularities.
He alleged that around 12 crore equity shares of the company were ‘fraudulently’ allotted to Reliance promoters and group companies. It has also been alleged that the allotment had been funded by RIL and other group firms
The market regulator sought the opinion of former Supreme Court judge Justice B N Srikrishna twice and also the opinion of a Chartered Accountant named Y H Malegam.
The RIL requested for disclosure of these opinions and related internal documents. When Sebi turned the request, RIL filed a writ petition before the Bombay High Court, which was dismissed in February 2019.
Background of the case
Acting on the 2002 complaint, the Sebi issued a show-cause notice to the promoters of RIL on February 24, 2011, alleging violation of takeover regulations.
In 2020, the Sebi filed a complaint before the Sebi special court seeking prosecution of RIL. The court, however, rejected Sebi’s plea as there was a delay in acting on the 2002 complaint.
After the rejection order by the special court, the Sebi moved Bombay High Court. Reliance also approached the Bombay High Court, seeking access to the three documents Sebi was relying upon. Its plea was rejected by the Bombay High Court, following which Reliance approached the Supreme Court that ruled in its favour.
Who is S Gurumurthy?
These documents relate to a 2002 complaint filed by S Gurumurthy, chartered accountant and editor of Tamil political magazine ‘Thuglak’, with the Sebi against Reliance, and its associate firms and directors.
Gurumurthy, who was in the Reserve Bank of India (RBI) board, said that he was pressured to take up the board position at the central bank. He is also the co-convenor of RSS affiliate Swadeshi Jagran Manch.
In November 2017, Gurumurthy had written an article terming demonetisation as “a fundamental corrective to the economy much like liberalisation of the 1990s.” Gurumurthy has delivered many public lectures on the merits of demonetisation and given several interviews on Doordarshan.
Timeline at a glance
- S Gurumurthy filed a complaint against Reliance in 2002, alleging irregularities in its associate companies, its promoters, including Mukesh Ambani and his wife, Nita, and 100 others in the issue of two preferential placement of non-convertible debentures in 1994.
- Acting on the complaint, Sebi moved a lower court in Mumbai in 2020 to initiate prosecution against the company.
- The court rejected the plea saying there was a delay of 18 years in acting on the complaint and was time-barred.
- Reliance then filed a plea in the Bombay High Court and requested Sebi to furnish documents regarding the investigation.
- The High Court rejected the plea and Reliance approached the apex court.
- In August, SC ordered Sebi to give certain documents related to the stock allotment case.
- RIL writes to Sebi seeking copies of three documents.
- Sebi says it is seeking legal advice.
- After a few days, RIL again demands access to copies.
- Sebi Says it's awaiting its senior counsel's advice.
- On August 20, RIL filed contempt plea against Sebi.
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