SEBI slaps ₹25-cr fine on Ambanis, others for ‘ignoring’ mandatory open offer

Over two decades after Reliance Industries (RIL) and its key promoters allegedly violated stock market norms, market regulator SEBI on Wednesday imposed a fine on them. On Wednesday, SEBI imposed a penalty of ₹25 crore on the Ambani family and firms linked to the promoter group for violation of takeover code regulations in 2000. In January 2000, the promoter stake in RIL had increased by 6.83 per cent following conversion of warrants issued in 1994.

The fine has now been imposed on the family led by both Mukesh Ambani and his younger brother Anil Ambani, which includes their mother, Nita Ambani, Tina Ambani and and their children.

Breach takeover regulations

Under the regulations, a promoter group acquiring more than 5 per cent of voting rights in any financial year ending March 31 needs to make an open offer to minority investors. “It is noted that in the instant matter the noticees have been alleged to have failed to make public announcement to acquire shares of RIL and deprived the shareholders of their statutory rights/opportunity to exit from the target company and therefore they breached the provisions of Takeover Regulations. Such charges against the noticees make the instant matter grave,” SEBI’s order on Wednesday said.

Unable to gauge unfair gains

The penalty of ₹25 crore will have to be jointly paid by the 34 individuals and entities who were allotted the warrants in 1994.

Under Section 15H of the SEBI Act (amended in October 2002), a maximum penalty of ₹25 crore or three times the amount of profits made out of the failure is allowed. SEBI said it was difficult to ascertain the unfair gain made by RIL promoter entities.

In its reply to SEBI, the noticees had argued that the initiation of adjudication proceedings in this case with a huge inordinate delay was “unreasonable, arbitrary and causes substantial prejudice to the noticees.” They further argued that the “adjudication proceedings sought to be initiated against the noticees ought be dropped, on this ground alone.”

SEBI had issued show cause notices in this matter in February 2011.