Mumbai, Jan 14(Agencies): Anil Ambani group companies Reliance Infra and RNRL on Friday settled a SEBI probe into possible violation of securities market norms by them for a collective settlement charge of Rs 50 crore.

In a consent order passed Friday, the Securities and Exchange Board of India (SEBI) said that it has agreed to settle the case after the two companies agreed to its certain terms and conditions, including the payment of settlement charges.
  
The case relates to a probe by SEBI in dealings in the shares of another Anil Ambani group firm Reliance Communications and investigations related to alleged violation of foreign investment norms.

As per the conditions of the settlement, the two companies would not be able to invest in any listed shares in the secondary market, other than mutual funds, until December 2012 and the individuals named in the case, which includes chairman Anil Ambani, cannot invest in secondary market until December 2011.

However, this condition will not apply to primary market issuances, buybacks and open offers.

Commenting on the SEBI order, a Reliance Infrastructure spokesperson said: "Reliance Infra has voluntarily settled SEBI show-cause proceedings of June 2010 against the company and its directors.

"In accordance with SEBI consent mechanism, the settlement is without admission or denial of guilt. Settlement made in interests of investors to pre-empt unnecessary and time-consuming litigation."

The company said that their directors have voluntarily made payment of entire settlement fees, with no burden on Reliance Infra, and added the settlement maintains full financial flexibility of the company to implement its growth projects.

As per the order, the two companies would also have to implement a policy of rotating their statutory auditors and, therefore, the auditors as on March 2010 cannot be reappointed for a period of three years commencing from 2010-11.

Sources said that the companies have already implemented the rotation of auditors policy is in accordance with risk management best practices.

The companies voluntarily offered to not make investments in secondary market to conserve resources for investment in own substantial projects, and will not impact growth prospects in any manner, the sources close to the development said.

SEBI said it began the probe after receipt of information that amounts raised by ADA group companies through external commercial borrowings/foreign currency convertible bonds had been used by them to invest in stock market.

The regulator then conducted investigations into the alleged affairs relating to the dealings, either directly or indirectly, in the shares of group company RCOM by other group companies.
    
SEBI said that its probe revealed that R-Infra and RNRL (which has now been merged with another group firm Reliance Power) were prima facie responsible for misrepresenting the nature of investments in 'yield management certificates/ deposits' and the 'profits and losses accounts in their annual reports for the years 2006-07, 2007-08 and 2008-09.

Consequently, SEBI charged R-Infra and RNRL, as also their top-management including Chairman Anil Ambani and board members Satish Seth, Lalit Jalan, SC Gupta and JP Chalsani of having violated various norms, including prohibition of fraudulent and unfair trade practices relating to securities market regulations.

Accordingly, SEBI issued show cause notices to these seven entities on June 7, 2010, and again on September 2, 2010.

In the meantime, the seven entities jointly proposed on September 9, 2010 a settlement of the SEBI proceedings through a consent order and later proposed revised consent terms in the matter on December 3, 2010.

After studying the proposals, a high powered advisory committee of SEBI recommended the case for settlement and SEBI accepted these recommendations on January 4, 2011.

The consent terms would be applicable on surviving companies if any of the entities undergo any change due to merger, amalgamation or other restructuring activities.

While RNRL and its noticee directors were asked to pay Rs 25 crore as settlement charges, R-Infra and its directors would pay another Rs 25 crore.

SEBI said that the consent order was without prejudice to its right to initiate enforcement actions, including reopening of the proceedings pending against the entities if any of its terms are breached or any of the representations made before it are found to be untrue.