Legal Analysis: Reliance Industries Limited & Ors. vs. Securities and Exchange Board of India

Citation: 2026 INSC 585
Court: Supreme Court of India
Bench: Division Bench comprising Justice J.B. Pardiwala and Justice R. Mahadevan
Judgment Author: Justice J.B. Pardiwala (with Justice R. Mahadevan concurring)
Date of Decision: May 29, 2026
Nature of Judgment: Civil Appeals under Section 15Z of the Securities and Exchange Board of India Act, 1992 against the judgment of the Securities Appellate Tribunal (SAT) Mumbai, which had upheld the Whole Time Member’s (WTM) order holding Reliance Industries Ltd. (RIL) guilty of fraudulent and manipulative trade practices in the trading of Reliance Petroleum Ltd. (RPL) shares and futures.

Synopsis of the Judgment
RIL, the promoter of RPL (75% subsidiary), decided to divest 5% of its holding (22.5 crore shares) in the cash segment. Between 01.11.2007 and 06.11.2007, RIL entered into agency agreements with 12 entities to take short positions of 9.92 crore shares in the November 2007 RPL futures segment (to hedge against a possible price fall). The 2001 SEBI Circular on single‑stock futures prescribed client‑level position limits, but did not explicitly prohibit or require disclosure of “persons acting in concert”. RIL did not disclose the agency arrangements. On the settlement date (29.11.2007), RIL sold 1.95 crore shares in the cash segment during the last 10 minutes. SEBI alleged that RIL (i) circumvented position limits through 12 entities, (ii) cornered 93% of open interest in November futures, (iii) depressed the settlement price by dumping shares in the last 10 minutes, thereby making unlawful gains of Rs.513 crore in the futures segment, and (iv) violated the PFUTP Regulations. The WTM and SAT (majority) held RIL guilty of fraud and manipulation. The Supreme Court partly allowed RIL’s appeal, holding that: (i) the agency agreements were not per se fraudulent; (ii) the 9.92 crore futures positions were valid hedges; (iii) the calculation of cornering (93%) was flawed (should have been across all derivatives, not just one series); (iv) SEBI failed to prove price manipulation on 29.11.2007; (v) however, RIL violated the disclosure requirements under the 2001 SEBI Circular by not disclosing the agency arrangements. The Court set aside the disgorgement order of Rs.447 crore and the findings of fraud under the PFUTP Regulations, but upheld the penalty for breach of position limits/disclosure.

1. Basic Information of the Judgment

• Case Title: Reliance Industries Limited & Ors. vs. Securities and Exchange Board of India

• Civil Appeal No.: 4015 of 2020 (with another appeal arising from Diary No. 4723 of 2024)

• Bench: Justice J.B. Pardiwala and Justice R. Mahadevan (Division Bench)

• Judgment Author: Justice J.B. Pardiwala

• Date of Decision: May 29, 2026

• Citation: 2026 INSC 585

• Appeal From: Judgment and order dated 05.11.2020 (and 04.12.2023) passed by the Securities Appellate Tribunal (SAT), Mumbai, which by a 2:1 majority dismissed RIL’s appeal against the order of the Whole Time Member (WTM) of SEBI.

2. Legal Framework

Laws, Regulations and Circulars Involved:

• Securities and Exchange Board of India Act, 1992 (SEBI Act): Section 11B (power to issue directions and disgorge illegal gains), Section 15Z (appeal to Supreme Court from SAT), Section 12A (prohibition of manipulative and deceptive devices).

• Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations): Regulation 2(1)(c) (definition of “fraud”), Regulation 3 (prohibition of certain dealings in securities – fraudulent, manipulative or deceptive devices), Regulation 4 (prohibition of manipulative, fraudulent and unfair trade practices), Regulation 4(2)(d) and (e) (inducing persons to deal in securities, manipulation of price).

• Securities Contracts (Regulation) Act, 1956 (SCRA): Section 9 (power to make bye‑laws), Section 18A (contracts in derivatives – legal and valid if traded on recognised exchange and settled through clearing house).

• SEBI Circular No. SMDRP/DC/CIR-10/01 dated 02.11.2001 (2001 SEBI Circular): Introduced single‑stock futures; prescribed client/customer level position limits (higher of 1% of free‑float market capitalisation or 5% of open interest); required disclosure of positions exceeding limits; did not explicitly mention “persons acting in concert”.

• SEBI Circular No. IES/DC/CIR-4/99 dated 28.07.1999 (1999 SEBI Circular): On index futures; required disclosure where persons acting in concert together owned 15% or more of open interest.

• NSE Circular No. NSE/CMPT/2982 dated 07.11.2001 (2001 NSE Circular): Operationalised position limits.

• Indian Contract Act, 1872: Section 226 (acts of agent attributable to principal).

Key Precedents Cited and Applied:

• Firm of Pratapchand Nopaji v. Firm of Kotrike Venkata Setty & Sons (1975) 2 SCC 208 – Principle: what cannot be

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