SC junks SEBI's pleas against two SAT orders against Mukesh Ambani, others

The Supreme Court rejected the Securities and Exchange Board of India's (SEBI’s) plea against a Securities Appellate Tribunal (SAT) order in July last year that rejected the market regulator's penalty of Rs 25 crore against promoters of Reliance Industries Ltd, imposed in April 2021 for violating takeover norms in an issue of shares of the company in 2000. In 2021, SEBI had fined 15 members of the Ambani family, including Mukesh Ambani and Anil Ambani, for violating SEBI's regulations on substantial acquisition of shares and takeovers.

The top court also dismissed SEBI's plea against the appellate tribunal order in December to quash the regulator's penalties against RIL's Chairman and Managing Director Mukesh Ambani, Navi Mumbai SEZ, and Mumbai SEZ in a case relating to price manipulation of Reliance Petroleum shares in 2007. Reliance Petroleum, a subsidiary of RIL, was later merged with RIL. However, the top court said it would hear Reliance Industries Ltd's appeal against the appellate tribunal order on December 2.

On January 1, 2021, SEBI had fined Reliance Industries Rs 25 crore, Mukesh Ambani Rs 15 crore, Navi Mumbai SEZ Rs 20 crore, and Mumbai SEZ Rs 10 crore for their alleged role in manipulation of prices of Reliance Petroleum shares in November 2007. While the appellate tribunal had quashed the penalties against Mukesh Ambani, Navi Mumbai SEZ, and Mumbai SEZ in the same case, it upheld SEBI's penalty against Reliance Industries. 

In the case involving violation of takeover norms, the apex court said, “30 years of litigation. No question of law is there. We find no question of law in this appeal in exercise of jurisdiction. The appeal is accordingly dismissed. Enough is enough! You cannot chase a person like this for 20 years.” In this case, Mukesh Ambani, Anil Ambani and other entities were RIL's promoters when 120 million shares of the company were allotted to them in 2000 on conversion of warrants acquired in 1994.

The 30 million warrants under question were attached to 60 million non-convertible debentures issued to RIL promoters and connected entities for Rs 300 crore in 1994. According to SEBI, the warrants carried an option to apply for equity shares and this option was exercised by the warrant holders in 2000. The 30 million warrants converted by the promoter entities and persons acting in concert led to a 6.83 per cent rise in their collective shareholding in RIL, exceeding the then-prevailing 5 per cent regulatory ceiling that required an open offer to public shareholders. The open offer was never made by the promoters and connected entities, which SEBI held was a breach of the takeover norms. In its order, the appellate tribunal had held that in the case of warrants carrying share acquisition rights, the obligation to make a public announcement of an open offer under takeover norms was triggered at the time of issue of warrants, and not when they were exercised.

Hearing the case on price manipulation of Reliance Petroleum shares on Monday, the top court said it would not proceed with the market regulator's appeal and would only hear Reliance Industries' petition. In that case, RIL had sold a large chunk of Reliance Petroleum futures, ahead of selling the shares in the cash market. RIL's sale of Reliance Petroleum shares in the cash market took place in the last 30 minutes of trading on the expiry day of the futures contract. The short positions in Reliance Petroleum futures were allowed to expire, and the whole operation earned a large profit for RIL, amounting to price manipulation and fraud, SEBI had ruled.