SAT Overturned A Penalty Of Rs 25 Crores Imposed By The SEBI On Reliance Industries

The Securities Appellate Tribunal (SAT) has recently overturned 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. The penalty was related to an alleged violation of the takeover regulations. 

The SAT, comprising presiding officer Justice Tarun Agarwala and technical member Meera Swarup, found that the proceedings had been initiated with a significant delay. They also dismissed the contention that SEBI's delay was caused by seeking legal opinion twice, deeming it unacceptable. 

The case originated from RIL's issuance of shares worth ₹12 crores to 38 entities in January 2000 through the conversion of warrants. SEBI contended that this resulted in the promoter holding in RIL exceeding the prescribed ceiling of 5% under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations of 1997 (SAST Regulations). 

According to the market regulator, this breach of the SAST regulations led to the issuance of show-cause notices to RIL's promoters in February 2011. Some entities filed settlement applications six months later, but SEBI rejected them ten years after their submission. 

Subsequently, SEBI imposed a joint penalty of ₹25 crore on RIL, its promoters, and other entities involved. However, the 11 entities challenged this decision before the SAT. 

The SAT ruled that the appellants had not violated any SEBI takeover regulations, rendering the imposition of the penalty unauthorized. It was revealed that the penalty amount had already been deposited with SEBI. 

With the penalty set aside, SAT directed SEBI to refund the penalty amount within 4 weeks to the concerned entities.