RIL takeover case: SAT quashes SEBI’s ₹25-cr penalty on Ambani brothers, others

The Securities Appellate Tribunal has quashed the capital market regulator SEBI’s order levying a penalty of ₹25 crore on industrialists Mukesh Ambani, Nita Ambani, Anil Ambani, Tina Ambani, and seven others for non-compliance with takeover norms in a Reliance Industries case dating back to 2000.

The SAT also ordered SEBI to refund ₹25 crore paid under protest by the appellants in four weeks.

In 2005, Mukesh and Anil split the family’s assets. SEBI noted that a 6.83 per cent stake was acquired by RIL promoters together with Persons Acting Concert (PAC) consequent to the exercise of an option on warrants attached to non-convertible secured redeemable debentures, which was in excess of the ceiling of five per cent prescribed under the takeover regulations.

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Public announcement

Thus, the obligation to make a public announcement about acquiring the shares arose on January 7, 2000. This was the date on which the PACs were allotted RIL equity shares on the exercise of warrants issued in January 1994, as the order had mentioned.

However, SEBI found that the promoters and PACs did not make any public announcement about acquiring shares, which was an alleged violation of the provisions of the takeover regulations.

In a plethora of cases, SAT said it had quashed the proceedings and the impugned order on the ground of inordinate delay.

In this case, it took 11 years from the date of the alleged violation in January 2000 to issue a show cause notice. Further, it took SEBI nine years to decide on the consent application. The impugned order has come after 21 years of the alleged violation, said SAT in its 124-page order.

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“We find that the delay has caused serious prejudice to the appellant. There is an inordinate delay not only in the initiation of the proceedings but also in their disposal. The impugned order, thus, is liable to be set aside also on this ground,” it said.

Moreover, it said a penalty of ₹25 crore has been imposed under Section 15H of the SEBI Act, which came into existence with effect from September 8, 2015, while the violation, if any, came into existence in January, 2000, and, therefore, the provision imposing a penalty existing on that date would apply.

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“We find that the appellant has not violated regulations, and the imposition of a penalty on the appellant is without any authority of law. Consequently, the impugned order cannot be sustained and is quashed,” said SAT.

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