The case pertains to alleged failure to comply with takeover rules.
NEW DELHI (India CSR): The Securities Appellate Tribunal (SAT), on a recent Friday, has overturned an order by the Securities and Exchange Board of India (SEBI) which had imposed a Rs 25 crore fine on prominent industrialists Mukesh Ambani, Anil Ambani, and other associated entities. The fine was levied for alleged non-compliance with the takeover norms in a case concerning Reliance Industries.
SAT’s Verdict on the SEBI Directive
Upon review, SAT found no violation of the Substantial Acquisition of Shares and Takeovers (SAST) Regulations by the appellant. They declared that the penalty’s imposition lacked legal backing, thereby rendering the contentious order unsustainable and subsequently quashed.
The Allegations and Initial Penalty
The original case centred around an alleged failure to conform with the takeover norms. Post SEBI’s order, the appellants had deposited the hefty penalty amount, which SAT has now instructed SEBI to refund within a span of four weeks.
“We find that the appellant has not violated … the SAST (Substantial Acquisition of Shares and Takeovers) Regulations. The imposition of penalty upon the appellant is without any authority of law. Consequently, the impugned order cannot be sustained and is quashed,” the appellate tribunal said in its 124-page order.
Historical Overview and SEBI’s Initial Stance
In April 2021, SEBI had imposed a cumulative fine of Rs 25 crore on Mukesh Ambani, Anil Ambani, Nita Ambani, Tina Ambani and other entities for their alleged non-adherence to the takeover norms in a case pertaining to Reliance Industries. This case stretches back to the year 2000. The regulator had accused RIL’s promoters and Persons Acting in Concert (PAC) of failing to disclose the acquisition of a stake greater than 5% in the company.
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 exercise of warrants issued in January 1994, the order had mentioned.
The Ambanis and the RIL Case
The Ambani brothers had partitioned the business empire established by their father Dhirubhai Ambani in 2005. SEBI pointed out that the 6.83 per cent stake acquired by RIL promoters along with PACs, following the exercise of option on warrants associated with non-convertible secured redeemable debentures, surpassed the maximum limit of 5% stipulated by the takeover regulations. The regulatory body claimed that a public announcement regarding the share acquisition should have been made on January 7, 2000. The watchdog body found no such announcement, deeming this as a violation of the takeover regulations.
| Important Facts | |
|---|---|
| Regulatory Body Involved | Securities and Exchange Board of India (SEBI) |
| Appellate Tribunal Involved | Securities Appellate Tribunal (SAT) |
| Fine Imposed | Rs 25 Crore |
| Entities Involved | Mukesh Ambani, Anil Ambani, Nita Ambani, Tina Ambani, other entities |
| Case | Non-compliance with takeover norms in Reliance Industries case |
| Alleged Violation | Failure to disclose acquisition of more than 5% stake in the company |
| Initial Penalty Date | April 2021 |
| SAT Verdict | Overturned the SEBI’s directive, found no violation of takeover norms |
| Refund Directed | Rs 25 Crore to be refunded to appellants by SEBI |
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