Supreme Court dismisses SEBI's plea against Ambani brothers over 30-year-old transaction

The Supreme Court on Monday dismissed an appeal by Securities Exchange Board of India (SEBI) against Reliance Investment Holdings, Mukesh Ambani, Anil Ambani and other entities over alleged violation of take over regulations concerning a transaction that has its origins in 1994. .A Bench of Justices JB Pardiwala and R Mahadevan criticised the inordinate delay by the market regulator in investigating the issue as well as in adjudicating on it and pursuing the ensuing litigation. "We are in November 2024 now, you filed the appeal in 2023. The transaction itself dates back to 1994, we need to put an end to this dispute somewhere," the Bench said. Despite the submissions by SEBI's lawyers that the defects in the appeal was cured on time, the Court refused to accept any arguments and proceeded to dismiss the plea. Senior Advocate Arvind Datar appeared for SEBI while Senior Advocates Harish Salve and Ritin Rai and advocates KR Sasiprabhu, Aditya Swarup, Amay Nabar and Vishnu Sharma AS represented Ambani and other respondents..Genesis of the caseOn December 10, 1992, shareholders of Reliance Industries Limited (RIL) approved the issuance of Non-Convertible Secured Redeemable Debentures (NCDs) with detachable warrants. On January 12, 1994, RIL allocated 6 crore NCDs worth ₹50 each to 34 entities, along with 3 crore warrants. Each warrant allowed holders to receive two equity shares of RIL upon paying ₹150 each within six years. These warrants were tradable and disclosed to the Stock Exchange in 1994.On January 7, 2000, RIL's Board allotted 12 crore equity shares to the warrant holders. According to the terms, each warrant holder could receive four shares upon paying ₹75 each. On April 28, 2000, Reliance disclosed that the shareholding of the promoters and their associates had increased by 6.83 per cent as of March 31, 2000, due to this allotment.SEBI initially accepted this disclosure on April 20, 2000, and took no action. However, in 2002, it received a complaint alleging violations of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations by RIL's promoters. SEBI issued a show-cause notice in 2011, 17 years after the date of the date of the transaction. On August 5, 2011, RIL and its promoter filed a consent application to settle the matter, which was ultimately rejected by SEBI on May 18, 2020. The case was then revisited, leading to a penalty of ₹25 crore in 2021. In July 2021, SAT set aside the order and criticised SEBI for its "inexplicable and inordinate" delay in imposing the penalty and concluded that the appellants had not violated SAST (Substantial Acquisition of Shares and Takeovers) regulations. The tribunal quashed SEBI's order, stating the penalty was without legal authority and ordered SEBI to refund the ₹25 crore within four weeks.