Reliance Industries limited v SEBI | Arvind P. Datar vs Harish Salve in court | Complete hearing

Описание: Reliance Industries Limited v. Securities and Exchange Board of India (SEBI) is a landmark case in Indian securities law dealing with allegations of market manipulation in derivative trading. SEBI had found Reliance guilty of manipulating the settlement price of certain stock futures by taking large positions in the cash and derivatives market, allegedly to gain unfair profits. Based on this finding, SEBI imposed monetary penalties and barred Reliance from accessing the capital market for a specified period. Reliance challenged SEBI’s order, arguing that its trades were legitimate hedging transactions carried out within the framework of law.

Before the Supreme Court, Reliance contended that mere size, timing, or impact of trades cannot automatically establish market manipulation unless a clear intent to distort the market is proved. It was argued that SEBI failed to demonstrate mens rea and relied heavily on circumstantial inference rather than concrete evidence. SEBI, on the other hand, maintained that as a specialised regulator, it was entitled to draw conclusions from trading patterns, especially where sophisticated market players are involved, and that direct proof of intent is often unavailable in complex financial markets.

The Supreme Court ultimately set aside SEBI’s findings, holding that market manipulation cannot be presumed solely on the basis of trading strategy or market impact without clear evidence of fraudulent intent. The Court emphasised that regulatory powers must be exercised with caution, and penalties under securities law require a strong evidentiary foundation. This judgment significantly strengthened the principle that commercial prudence and aggressive trading, by themselves, do not amount to illegality, and it remains a key precedent on the limits of SEBI’s enforcement powers and the standard of proof in market manipulation cases.

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