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Imposition of ₹ 25 Crores Penalty on Mukesh Ambani, Anil Ambani & Family for Irregularities in RIL Shareholding By SEBI [READ SEBI ORDER]

By Tanya Sehrawat      09 April, 2021 01:33 PM      0 Comments
Imposition of ₹ 25 Crores Penalty on Mukesh Ambani, Anil Ambani & Family for Irregularities in RIL Shareholding By SEBI

A penalty of Rs. 25 Crores has been imposed on family members of the Ambani Family, namely, Mukesh Anil Ambani, Nita Ambani, Tina Ambani,  and few others by the Security and Exchange Board of India. 

This penalty has been imposed on them on the issue of irregularities pertaining to the issue of 12 crore equity shares in January 2000 by Reliance Industries Ltd at a price of Rs.75 per share to 38 allottee entities. There have been violations of Regulation 11(1) of the Takeover Regulations.

The allotment had been made consequent to the exercise of the option on warrants attached with 6,00,00,000-14% Non-Convertible Secured Redeemable Debenture (NCD) of Rs.50/-each aggregating to Rs.300,00,00,000 (PPD IV) issued in the year 1994. It was observed that it had disclosed the above mentioned 38 allottee entities as Persons Acting in Concert("PACs") with the RIL promoters as from the disclosure that was filed under Regulation8(3) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations,1997 ("Takeover Regulations") by RIL to Bombay Stock Exchange (BSE) on April 28, 2000. 

It was further observed as from the aforesaid disclosures that were made by RIL that the shareholding of RIL promoters together with PACs had increased from 22.71% as on March31, 1999 to 38.33% as on March31, 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. However, 6.83% shares that were acquired by RIL promoters together with PACs in exercise of 3 crore warrants, were alleged to be in excess of ceiling of 5% prescribed in rein regulation 11(1) of Takeover Regulations. 

In addition to this, an allegation of the obligation in order to not make an additional acquisition of more than 5% of voting rights in any financial year unless such acquirer makes a public announcement to acquire shares in accordance with the regulations under regulation 11(1) of Takeover Regulations arose on January 7, 2000, the date on which the PACs were allotted RIL equity shares on exercise of warrants issued in January 1994 was made. 

There were no public announcements made for acquiring sharing by the Promoters and the PACs which attracted the violation of provisions of regulation 11(1) of Takeover Regulations.

A period of 45 days has been granted to deposit the penalty. 

It must also be noted that Mukesh Ambani, Anil Ambani, Nita Ambani, Tina Ambani and fifteen other members of the Ambani Family and few Reliance entities have been held jointly and severally liable with the imposition of penalty. Also, it must be highlighted that Mukesh Ambani's children Akash Ambani and Isha Ambani, and Anil Ambani's son Jayanmol Ambani, were minors on the date of the violation, January 7, 2000. 

SEBI also referred to Section 8 of the Hindu Minority and Guardians Act and went on to hold Mukesh Ambani and Anil Ambani as natural guardians of their children. Therefore, they must be held liable as for the violation in respect of the shares that were held by their children, who were minors on the date of violation.

While passing the order, the Adjudicating Officer of SEBI, K Saravanan observed:

“I hold that the Noticees by not making a public announcement have violated and have been continuing to violate the provisions of Regulation11(1) of the Takeover Regulations". "The Noticees by their failure to make public announcement, deprived the shareholders of their statutory rights/ opportunity to exit from the company"

"The acquisition of shares which gives rise to voting rights thereon is a continuous contravention of the bar in law contained in Regulation 11 as the Acquirers and Persons acting in Control are not 'entitled' in law to lawfully exercise the voting rights based on such a null and void acquisition. This cannot be considered as anything but a continuing failure to give the public announcement of the open offer as required under Regulation 11(1) of the Takeover Regulations"

"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 Notices 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".

"It is an admitted fact that the Noticees did not make the public announcement as per the mandatory requirement of Regulation 11 of the Takeover Regulations and the open offered being a consequential and necessary part thereof, which was absolute in nature. Such a failure is a continuing violation till discharge.”

The market regulator further stated that they have been liable under Section 15H of the SEBI Act, 1992 for violation of Regulations11(1) of the Takeover Regulations. 

Lastly, in the order, the Adjudicating Officer said, "I note that the respective Noticees who are the Natural Guardians of the aforesaid minor Noticees are responsible not only on their own behalf but also on behalf of the minors."



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