SC dismisses SEBI plea against Ambani brothers over 30-year-old transaction

NEW DELHI: The Supreme Court on Monday dismissed a petition filed by the Securities Exchange Board of India (SEBI) against Reliance Investment Holdings and its promoters, Mukesh Ambani, Anil Ambani and other entities over alleged violations of takeover regulations concerning a transaction that has its origins in 1994.

A Bench comprising Justice JB Pardiwala and Justice R Mahadevan while criticizing SEBI said, "The transaction dates back to 1994, we need to put an end to this dispute somewhere," the Bench said.

Criticising the inordinate delay by SEBI in investigating the issue as well as in adjudicating it and pursuing the ensuing litigation.

The Bench said,"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.

Senior Advocate Arvind Datar appeared for SEBI and argued that the defects in the appeal were cured on time.

Senior Advocates Harish Salve and Ritin Rai with advocates KR Sasiprabhu, Aditya Swarup and Vishnu Sharma represented Ambani and other respondents.

The Court refused to accept any arguments and dismissed the plea.

The case pertains to that on 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.

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.