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SAT dismisses Reliance Industries plea in Jio-Facebook deal disclosure case

The Securities Appellate Tribunal (SAT) on Friday dismissed Reliance Industries' (RIL) appeal against a Securities and Exchange Board of India (Sebi) order imposing a ₹30 lakh penalty for violating Prohibition of Insider Trading (PIT) Regulations. In its June 2022 adjudicating order, Sebi found RIL in breach of PIT Regulations for failing to disclose details of a potential investment deal with Facebook in Jio Platforms promptly. 'We find the appellants in violation of Principle 4, Schedule A of the PIT Regulations and uphold the SEBI order,' said the SAT bench, presided over by Justice PS Dinesh Kumar. The case relates to a confidentiality and non-disclosure agreement signed between RIL and Facebook in September 2019, followed by a non-binding term sheet on March 4, 2020, for Facebook's investment in Jio Platforms. Legal experts said that while the monetary penalty in this case was just ₹30 lakh, the SAT judgement could set a precedent for companies on handling news leaks and disclosures. On March 24, 2020, the Financial Times reported that Facebook was nearing a deal to acquire a 10 per cent stake in Jio. Domestic media also followed up the news report, triggering a 15 per cent surge in RIL's share price. RIL formally disclosed the Jio-Facebook deal to stock exchanges only on April 22, 2020, after executing a definitive transaction document, prompting another 10 per cent jump in its stock price. RIL argued it was not obligated to confirm or deny market rumours or disclose the deal under Principle 4, as the regulation applies only to 'selective leaks.' Sebi countered that confidentiality agreements do not override PIT Regulations and that undisclosed price-sensitive information (UPSI) must be disseminated promptly if leaked. The SAT ruled that RIL was duty-bound to disclose the information once it appeared in credible media reports. 'It was RIL's responsibility to make prompt disclosure to ensure information was generally available, especially when selectively reported by international media to a limited audience,' the order stated. The tribunal emphasised that in cases of uncertainty, companies must disclose information to protect shareholders. It also noted the credibility of the Financial Times report, given the involvement of two global conglomerates and the need for high-level approvals in a cross-border deal. 'RIL's argument that only a binding agreement triggers disclosure lacks merit and undermines the spirit of PIT Regulations,' the order added.