The market regulator Securities and Exchange Board of India (Sebi) has asked the government to consider appropriate action against Reliance Industries Ltd (RIL) for allegedly routing funds to dummy companies for buying large quantity of its shares 2000.
On Monday, the stock opened at Rs 1,005 and zoomed to a high of Rs 1,035. The scrip is now trading at Rs 1019, up 0.81% from its previous close.
Based on retired Justice B N Srikrishna's opinion on the issue after its own investigation, Sebi, in a communication to the Ministry of Company Affairs (MCA) earlier this month, said the matters of "irregular issue of privately placed debenture (PPD)-IV and V by RIL" are being referred for "consideration and appropriate action".
"Justice Srikrishna has also opined that the manner in which RIL has managed to fund the buying of its own securities is really a matter for action by the authorities enforcing the provisions of the Companies Act, viz MCA," the communication said.
While no response could be obtained from the ministry, Sebi officials declined comment. Nor did the RIL spokesperson on the issue.
The Sebi probe relates to a complaint by S Gurumurthy alleging that the core of the fraud was the criminal misappropriation amounting to virtual smuggling out of RIL (through non-convertible debentures) of 120 million shares of the company in 2000, representing 11.38 per cent of the equity capital.
This, according to the complaint, had caused loss of at least Rs 2,700 crore to RIL and its investors. The complainant had alleged that while shares (on conversion of warrants) were issued to UTI at Rs 401 a piece, 34 dummy companies received these at Rs 75 per share.
The matter referred to allotment of 120 million equity shares at a price of Rs 75 each on conversion of warrants attached with non-convertible debentures, aggregating Rs 300 crore during 2000. Justice Srikrishna has opined that the "evidence on record strongly suggests that there was an elaborate scheme to route the money from RIL and Reliance Petroleum to the 34 private companies to enable them to subscribe to the equity shares on conversion of PPD IV".
"The investigating officer's conclusion on this aspect of the matter is justified, as it appears that the 34 companies were dummies registered at common addresses with hardly any net worth and could not have afforded to buy large quantities of shares on the same day."
The regulator had referred the matter to Justice Srikrishna after the investigation officer submitted a report to the Sebi Chairman on February 4, 2005.
Seeking cancellation of shares issues by RIL in January 2000, the complainant had alleged that according to the resolution of the Annual General Meeting on PPDs in 1992 no allotment could have been made to persons connected with the directors of RIL, the allottees were connected with and were in fact "controlled by promoters of RIL".
