Genesis of the matter goes back to the issue of Non-Convertible Debentures (NCDs) issued on a Private Placement basis by RIL to various entities in 1994. Subsequent to receipt of a complaint SEBI, after almost a decade, in 2002 decided to investigate. In 2010, SEBI alleged that RIL had funded purchase of its own shares by 38 related entities and thereby violated Section 77 (2) of the Companies Act, 1956 and consequently, violated Regulations 3, 5 and 6 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995. RIL, in reply, addressed numerous letters to SEBI requesting for copies of the documents and submitting inter alia that the issue concerning violation of Section 77 of the Companies Act, 1956 was examined by the Ministry of Corporate Affairs (MCA) which had concluded that the transaction was compliant with the applicable law. Subsequently, the Adjudicating Officer of SEBI issued a show cause notice to the promoters of RIL under Rule 4 of the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 alleging violation of Regulation 11(1) of the SEBI Takeover Regulations (as it then stood).
Source: Barandbench
