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Wednesday, April 21, 2021

Sebi slaps Rs 25 crore fine on Ambanis in 2000 case over alleged violation of the takeover code regulations

The case pertains to an increase in the promoter stake of Reliance Industries Ltd (RIL) in January 2000, after conversion of some warrants issued as early as 1994.

By: ENS Economic Bureau | Mumbai |
Updated: April 8, 2021 7:40:50 am
Mukesh Ambani and Anil Ambani.

After twenty years, the Securities and Exchange Board of India (SEBI) on Wednesday imposed a penalty of Rs 25 crore on Mukesh Ambani, Anil Ambani, Nita Ambani, Tina Ambani and firms linked to the Ambanis for alleged violation of the takeover code regulations in 2000.

The case pertains to an increase in the promoter stake of Reliance Industries Ltd (RIL) in January 2000, after conversion of some warrants issued as early as 1994.

SEBI has alleged the promoter group failed to make an open offer as required under the norms.

“In the instant case, the violation was not one which was committed once and for all but that which continues till date. The violation is a disobedience of the statutory provisions by which the acquisition of securities giving the Noticees (Ambani family) enhanced control by the exercise of voting rights, etc and these are violations which are continuing so long as the voting rights are acquired in violation of the letter and spirit of the law,” said in a 85-page adjudication order.

Under the Substantial Acquisition of Shares and Takeovers (SAST) Regulations 1997, if a promoter group acquires over 5 per cent of the voting rights, in a financial year, it needs to make an open offer to minority investors that allows them to exit the company.

“… the noticees have been alleged to have failed to make public announcement to acquire shares of RIL and deprived the shareholders of their statutory rights / opportunity to exit from the target company and therefore they breached the provisions of Takeover Regulations. Such charges against the noticees make the instant matter grave,” said Sebi.

The SEBI order said it was difficult to ascertain the unfair again made by RIL promoter entites due to this violation.
“…while determining the quantum of penalty, I note that no quantifiable figures or data are available on record to assess the disproportionate gain or unfair advantage and amount of loss caused to an investor or group of investors as a result of the default committed…,” said Sebi.

The regulator said that the penalty will have to paid jointly by 34 individuals named in the SEBI order including the mother and children of Mukesh Ambani and Anil Anil Ambani, within 45 days.

SEBI said the Ambani family in its reply to the regulator in November 2020, said the issue of warrants and the issue of shares on conversion of warrants were not subject to Sebi’s takeover regulations.

The Ambani family also said the delayed issuance of a show cause notice (SCN) and adjudication proceedings in the case was “unreasonable, arbitrary and causes substantial prejudice” to them.

SEBI had issued the SCN to the Ambani family in 2011, almost eleven years after the alleged violation.

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