The market watchdog Securities and Exchange Board of India (Sebi) has imposed a penalty of Rs 11 crore on Reliance Petroinvestments Limited (RPIL), a subsidiary of the Mukesh Ambani-owned Reliance Industries Limited (RIL), in a six-year-old insider trading case.

The capital market regulator has alleged that RPIL, in 2007, was involved in insider trading while dealing in the shares of Indian Petrochemical Corp Limited (IPCL) and hence, made undue profits of over Rs 3.82 crore.

In its 17-page order, the regulator pointed out that between February 27, 2007 and March 2, 2007, prior to the announcement of IPCL merging with RIL and declaring a dividend,  RPCL bought 21,32,953 shares of IPCL for over Rs 55.5 crore and did not sell any shares till the month end.

“It is alleged that RPIL did not sell any shares of RIL till March 31, 2007 and received dividend of Rs 6 per share amounting to Rs 1,27,97,718. Pursuant to record date for merger of IPCL with RIL on October 18, 2007, RPIL received 4,26,590 shares of RIL as against 21,32,953 shares of IPCL acquired prior to the dissemination of the price sensitive information,” the order said.

Following allegations of RPIL making undue profits by accessing price-sensitive information that had not been announced publicly, Sebi launched an investigation. The regulator said in its order that investigations into the case revealed that following the merger, RPIL gained control over IPCL similar to a “promoter having control over the company with the total shareholding of approximately 46 percent”.

According to the regulator, “The findings of the investigation led to the allegation that RPIL was in the possession of unpublished price sensitive information while trading in the scrip of IPCL prior to announcement of declaration of interim dividend and amalgamation of IPCL with RIL which resulted in violation of regulation 3 of SEBI (Prohibition of Insider Trading) Regulations, 1992.”

Taking cognizance of the amount of profits made by RPIL by indulging in insider trading, the adjudicating officer D Ravi Kumar imposed a penalty of Rs 11 crore on RPIL which is to be paid within the next 45 days.