SAT sets aside SEBI order imposing penalty of ₹25 crores on Reliance Industries

The Securities Appellate Tribunal (SAT) recently set aside a penalty of ₹25 crores imposed by the Securities and Exchange Board of India (SEBI) on Reliance Industries and its promoters including Mukesh Ambani, Anil Ambani and 8 other entities for alleged violation of the takeover regulations. .A coram of presiding officer Justice Tarun Agarwala and technical member Meera Swarup observed that the proceedings had been initiated belatedly. “Proceedings in the instant case were initiated belatedly. There was undue delay not only in the initiation of the proceedings but also in the disposal of the proceedings. No satisfactory reasoning has been given by the respondent as to why they could not act immediately when the disclosures were made by RIL in 2000 and why they waited for two long years and only acted when a complaint was received”, the order recorded. The Court held that the contention that SEBI took legal opinion twice which was caused a delay of another three years, is unacceptable..The facts leading to the case were that RIL issued shares worth ₹12 crores to 38 entities in January 2000 as a conversion of warrants.SEBI claimed that after the issue, the promoter holding in RIL increased to 6.83% which was beyond the ceiling of 5% prescribed under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations of 1997 (SAST Regulations). This amounted to breach of the SAST regulations, it was contended by the market regulator.SEBI issued show-cause notices to RIL’s promoters in February 2011. Six months later, some of the entities filed settlement applications, which SEBI rejected a decade later.The markets regulator imposed a joint penalty of ₹25 crore on RIL, its promoters and its other entities. The 11 entities challenged the order before SAT..SAT held that the appellants had not violated any SEBI takeover regulations and in view of this, imposition of penalty was without authority. “We find that the appellant has not violated Regulation 11(1) (Exemption to make an open offer for acquiring shares) of the SAST 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 124-page order stated. .SAT was informed that the penalty amount had been deposited with SEBI. Since the amount had been set aside, SEBI was directed to refund the penalty amount within 4 weeks. .Senior Advocate Harish Salve with Advocates Somasekhar Sundaresan, Raghav Shankar, Ashwath Rau, Vivek Shetty, Ramya Suresh, Cheryl Fernandes, Praneeta Ragji and Dhaval Vora briefed by AZB & Partners and Advocate Amey Nabar appeared for RIL, its promoters and other entities. Senior Advocates Arvind Datar and Shiraz Rustomjee with Advocates Suraj Chaudhary, Prateek Pai, Mihir Mody, Arnav Misra and Mayur Jaisingh briefed by K Ashar & Co. appeared for SEBI.[Read order]