LI Network
Published on: 30 July 2023 at 13:58 IST
The Securities Appellate Tribunal (SAT) has recently quashed the penalty of ₹25 crores imposed by the Securities and Exchange Board of India (SEBI) on Reliance Industries Limited (RIL) and its promoters, including Mukesh Ambani and Anil Ambani, along with eight other entities.
The penalty was imposed on allegations of violating SEBI’s takeover regulations.
The tribunal, consisting of presiding officer Justice Tarun Agarwala and technical member Meera Swarup, noted that the proceedings were initiated belatedly.
The court observed that there was an undue delay in both initiating and disposing of the proceedings. Moreover, the respondent failed to provide satisfactory reasoning as to why they didn’t take immediate action when RIL made the disclosures in 2000 and instead waited for two years until a complaint was filed.
SEBI claimed that RIL issued shares worth ₹12 crores to 38 entities in January 2000 through the conversion of warrants.
Following the issue, the promoter holding in RIL increased to 6.83%, which allegedly exceeded the 5% ceiling prescribed under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations of 1997 (SAST Regulations).
This was considered a violation of the SAST regulations by the market regulator.
The show-cause notices were issued to RIL’s promoters in February 2011, and some entities filed settlement applications six months later, which SEBI rejected ten years later. Eventually, SEBI imposed a joint penalty of ₹25 crore on RIL, its promoters, and other entities.
Challenging the SEBI order, the 11 entities appealed before SAT. The tribunal ruled that the appellants had not violated any SEBI takeover regulations, and consequently, the penalty imposed lacked authority.
The imposition of penalty upon the appellant is without any authority of law. Consequently, the impugned order cannot be sustained and is quashed, the 124-page order stated.
SAT was informed that the penalty amount had already been deposited with SEBI. Since the penalty was set aside, SEBI was directed to refund the amount within four weeks.
Senior Advocate Harish Salve, along with Advocates Somasekhar Sundaresan, Raghav Shankar, Ashwath Rau, Vivek Shetty, Ramya Suresh, Cheryl Fernandes, Praneeta Ragji, and Dhaval Vora, briefed by AZB & Partners, represented RIL, its promoters, and other entities.
On the other side, Senior Advocates Arvind Datar and Shiraz Rustomjee, along with Advocates Suraj Chaudhary, Prateek Pai, Mihir Mody, Arnav Misra, and Mayur Jaisingh, briefed by K Ashar & Co., appeared for SEBI.
