Amid the COVID -19 clouds we have an another SEBI judgement on the RIL that made headlines ‘SEBI IMPOSES PENALTY OF RS. 25 Cr on RIL Promoters‘ and that headline made us believe that we are headstrong in protecting every investor and every individual.
However it raised some basic questions of law and there retrospective effects such as period of limitation, the Power of SEBI to investigate and power to impose penalties thereof.
In the below write up we tried to summaries the order issued by SEBI in the matter of RIL dated 7th of April, 2021 in few lines to provide the basic understanding of the same.
IN THE MATTER OF RELIANCE INDUSTRIES LTD.
SEBI in its order dated April 07, 2021 imposed a penalty of Rs. 25 Crores on Mukesh Ambani, Anil Ambani, other individuals and entities for non-compliance with takeover norms in a Reliance Industries case dating back to 2000, SEBI conducted an investigation into the alleged irregularities relating to the issue of 12 crore equity shares in January 2000 by Reliance Industries Ltd. (hereinafter referred to as “RIL”) at a price of Rs. 75 per share to 38 allottee entities. The allotment was made consequent to the exercise of the option on warrants
SEBI alleged that Reliance in the year 1994 issued share warrants worth Rs. 6 Crore to its promoters and Person’s acting in concert to be converted into Equity shares of the company. It was further held that in January 2000 the share warrants were subsequently converted into equity shares thereby amounting to in crease of shares by 6.83% to its promoters and person acting in concert which resulted in giving of a public announcement under the SEBI Takeover Regulations, 1997 as increase was more than 5% and as no public announcement was provided by the promoters and person acting in concert, SEBI initiated adjudication proceedings against the said persons for alleged violation of Regulation 11 of SEBI Takeover Code, 1997.
It was seen that on a complaint of Mr. S. Gurumurthy on 21/1/2002 SEBI issued SCN to RIL in the year 2011 held that the shareholding of RIL promoters together with PACs had increased from 22.71% as on March 31, 1999 to 38.33% as on March 31, 2000. Out of these, 7.76% shares were acquired consequent upon a merger and thus were exempt under Regulation 3(1) (j) (ii) of Takeover Regulations.
CONTENTIONS OF THE RIL
The Promoters and person acting in concert in their reply submitted that these were the facts on which no order shall be passed against them.
The Adjudicating Officer in its order stated that “the arguments of the Notices that Takeover Regulations are not applicable in the present proceedings are devoid of any merits” as the Conversion of Shares was done in year 2000 which and before which the SEBI takeover Regulation 1997 came into existence. It also held that it received a Complaint from one Mr. S. Gurumurthy on 21/1/2002 and thus acted in accordance to the complaint and thereby took various enforcement actions including the present adjudication proceedings for alleged violation(s) of the Takeover Regulations was approved on September 15, 2010.
Further an appeal in the Securities Appellate Tribunal is going to be filed by the Reliance Industries Limited against the order on the account that it has not committed any violation under the SEBI Takeover Regulations as alleged by the Adjudicating Officer.
The article is written by Team Anupama Tripathi & Associates and solely for the purpose of education and comment, for more you can connect us # 8800839633 or [email protected]