The finance ministry has told Parliament that companies belonging to both the Ambani brothers — Reliance Petroleum and Reliance Infrastructure — were being investigated for alleged violation of norms governing insider trading and overseas borrowings, respectively.
Reliance Petroleum (RPL) is one of the 19 companies against which market regulator SEBI has received complaints alleging insider trading in the past three years, acting FM Pranab Mukherjee said on Wednesday.
Responding to another question, minister of state for finance Pawan Kumar Bansal said that the Reserve Bank had referred cases of alleged violation of the external commercial borrowings (ECB) regulations by Reliance Infrastructure, earlier known as Reliance Energy, to the Enforcement Directorate. A Reliance Infrastructure spokesperson said the company had been legally advised that there had been no Fema violations.
The allegation of insider trading in Reliance Petroleum pertains to a series of events in November 2007, when 10 entities sold stock futures of RPL in the first week of the month, days before parent Reliance Industries (RIL) started trimming its stake in the refiner.
Reliance Industries confirmed to ET that these entities conducted these transactions
on behalf of RIL. In an emailed response, the company spokesperson said: “All the entities have acted as agents of Reliance Industries (RIL). The entire sale proceeds net of commission was paid over by these entities to RIL. The resulting income accruing from the
transactions has been duly accounted for in the books of RIL for the period ending March 31, 2008.”
The spokesperson further said: “As mentioned earlier, all profits (net of commission) for both forward and cash segments have been duly accounted for in the books of Reliance Industries and hence, there is no question of insider trading.”
The queries from ET and RIL’s response both occurred before Wednesday’s developments. In case of Reliance Infrastructure, the controversy relates to investment of ECB proceeds in fixed deposits and debt mutual funds, something not permitted by the ECB guidelines in force at the time. Reliance Infrastructure had raised ECBs of $360 million and $150 million in July and November 2006.
ECB norms at the time of these transactions required funds to be parked outside the country and was also not to be used in the capital market.
RBI had passed a compounding order on the alleged violations regarding the $360 million and a penalty of Rs 124.68 crore was levied. The company did not pay the penalty and sought compounding of both the ECBs — $360 million and $150 million.
The application was not found to be in order and the company was allowed to file a separate application for compounding of the alleged offence relating the second ECB. The matter was referred to the ED, as the company did not respond further, the minister said in the written reply.
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