The Securities and Exchange Board of India (Sebi) is of the view that the insider trading case involving Mukesh Ambani's Reliance Industries (RIL) cannot be settled through consent mechanism as any such a decision would be against public interest.
In a hearing before the Securities Appellate Tribunal (SAT) on Monday, Sebi counsel Darius Khambata said the regulator cannot be compelled to settle the case. “They (RIL) have a right to go for consent application. Does that confer a right, no... The consent norms are purely administrative guidelines. It should be left entirely to Sebi to offer or not offer a settlement process,” Khambata said, citing a Bombay High Court order in a similar case involving Shilpa Stock Broker.
“...The person who is alleged to be in breach of the regulations or statutory provisions, which are designed to protect the public interest, will have no vested right either to insist upon Sebi to settling a dispute or enforcing compliance of the terms,” Khambata added.
In response, RIL senior counsel Janak Dwarkadas challenged the submissions made by Sebi, stating the stance taken by Sebi was prejudiced against RIL. The counsel representing the energy giant also challenged changes made by Sebi to norms governing the settlement of cases through the consent mechanism, especially those that are already under consideration.
“Regulator cannot abuse the power it has. It has the power, coupled with a duty, and the duty is that the case is treated fairly... Sebi can reject our application but, at least, they should hear us out,” Dwarkadas said.
Dwarkadas also asked the tribunal to direct Sebi to hear RIL's consent plea again. RIL was told it could apply for settlement via consent mechanism on April 15, 2011, and that it was wrong on the part of Sebi to say the application could not be handled under the consent route, Dwarkadas argued. “What is the difficulty if Sebi now fixes a meeting of the internal committee and decides on the consent application, now that the inspection of documents is finally over,” Dwarkadas said to the three-member bench headed by JP Devadhar.
In May 2012, Sebi had tightened the norms for settlement through the consent framework. As a result, many cases, including those related to insider trading, are not being settled through this mechanism.