The Supreme Court has reserved judgment in a securities law dispute between Reliance Industries and SEBI over alleged market manipulation by ARIL entities. The ruling may reshape interpretation of SEBI regulations and electronic trading norms in Indian capital markets.
NEW DELHI: The Supreme Court of India has reserved its judgment in a significant securities law dispute involving Reliance Industries Limited (RIL) and the Securities and Exchange Board of India (SEBI) concerns allegations of market manipulation and fraud in trading of shares by RIL and its group entities, collectively referred to as ARIL.
The matter was heard by a Division Bench comprising Justice JB Pardiwala and Justice Joymalya Bagchi, and is expected to have substantial implications for the interpretation of SEBI regulations and electronic trading mechanisms in Indian capital markets.
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Background of the Case
SEBI initiated enforcement proceedings against Reliance Industries Ltd. and its group entities alleging that their trading strategies violated securities regulations and amounted to market manipulation. According to SEBI, ARIL’s trading activity had the effect of influencing share prices in a manner inconsistent with fair market practices.
The allegations were examined by the Securities Appellate Tribunal (SAT), where a majority upheld SEBI’s findings. Aggrieved by the SAT decision, Reliance Industries approached the Supreme Court, contending that SEBI had misinterpreted both the regulatory framework and the mechanics of electronic trading.
At the heart of the dispute lies the interpretation of SEBI circulars and whether regulatory obligations can be inferred or imposed retrospectively beyond what is expressly stated.
Arguments of the Parties
- Submissions on Behalf of Reliance Industries
Senior Advocate Harish Salve, appearing for the petitioner, strongly criticised the SAT’s reasoning and SEBI’s approach to regulation.
He submitted:
“My Lords, the majority in the SAT appears to have misunderstood the very submission being made. The response seems to be: ‘We do not understand what you are trying to say.’ If such an approach is accepted, it will lead to complete havoc in securities regulation.”
Salve argued that SEBI could not read additional obligations into its circulars after the event. According to him, regulatory certainty is a foundational principle of securities law.
He stated:
“First, if SEBI believed that a particular restriction was necessary, it ought to have been expressly incorporated in the circular itself. SEBI did issue a circular, and whatever restrictions were intended were already placed there. There is no scope for reading in additional obligations after the event.”
Addressing SEBI’s contention that ARIL lacked awareness of the regulatory framework, Salve clarified:
“Second and third, it is not disputed that ARIL was aware of the regulatory framework. That position has already been addressed.”
SEBI alleged that ARIL sold shares below the “last traded price,” suggesting manipulative intent. Refuting this allegation, Salve explained that SEBI had misunderstood how electronic trading systems operate.
He submitted:
“SEBI alleges that we sold shares below the ‘last traded price.’ This misunderstands how electronic trading works.”
Explaining order matching in electronic markets, he stated:
“First, if a buy order exists at Rs 203 and I place a sell order at ₹201, the trade executes at Rs 203, not Rs 201.”
He further explained the realities of trading in volatile markets:
“Second, when no trades occur at the last traded price, a seller may progressively place orders lower until a match occurs—especially in a volatile market.”
Relying on objective data, Salve pointed out:
“The trading data, now available from NSE and SEBI themselves, shows that other participants were simultaneously selling at prices lower than ours.”
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Observations of the Court
After hearing detailed submissions from the parties, the Supreme Court concluded the proceedings.
The Bench recorded:
“Arguments concluded. Judgment reserved. Final written submissions to be filed within two weeks.”
While the Court did not make substantive oral observations on merits at this stage, the reservation of judgment signals that the Bench will closely examine:
- The scope of SEBI’s regulatory powers
- Whether obligations can be implied beyond explicit circulars
- The legal understanding of electronic trading and price discovery
- The correctness of the SAT majority decision
The Supreme Court’s forthcoming verdict in Reliance Industries Ltd v. SEBI is expected to clarify crucial aspects of securities regulation, particularly the limits of regulatory interpretation and enforcement in electronic trading environments. The decision will likely serve as a precedent affecting future SEBI actions and compliance standards across India’s capital markets.
Case Title: Reliance Industries Limited v. Securities and Exchange Board of India (Civil Appeal No. 4015 of 2020),