SEBI Imposes ₹ 25 Crore Penalty On Mukesh Ambani, Anil Ambani & Family For Irregularities In RIL Shareholding

SEBI Imposes ₹ 25 Crore Penalty On Mukesh Ambani, Anil Ambani & Family For Irregularities In RIL Shareholding

The Securities and Exchange Board of India (hereinafter referred to as “SEBI”) on 8th April 2021, Thursday levied a penalty of Rupees 25 Crores on prominent affiliates of the Reliance family. 

SEBI has imposed the penalty on reliance family for violations of the provisions of Regulation under 11(1) of the Takeover Regulations over irregularities relating 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. 

Needful to mention that the allotment was made after the option on securities attached with 6,00,00,000-14% Non-Convertible Secured Redeemable Debentures (hereinafter referred to as “NCD”) of Rs.50/-each aggregating to Rs.300,00,00,000 issued in the year 1994. At the outset from the disclosure filed under Regulation 8(3) of SEBI by RIL to Bombay Stock Exchange (Hereinafter referred to as “BSE”), it was observed that it had disclosed the above mentioned 38 allottee entities as Persons Acting in Concert (hereinafter referred to as “PACs”) with the RIL promoters. Subsequently, the aforesaid disclosures made by RIL detected that the shareholding of RIL promoters together with PACs had increased from 22.71% to 38.33% as of March 31st, 2000. Additionally, out of these, 7.76% shares were acquired resulting 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 the exercise of 3 crore warrants, were alleged to be more than the ceiling of 5% prescribed in regulation 11(1) of Takeover Regulations. 

Moreover, it was claimed that the requirement for not making the additional acquisition of more than 5% of voting rights in any financial year except such acquirer makes a public announcement to acquire shares under the regulations under regulation 11(1) of Takeover Regulations arose on January 7, 2000, i.e. the date on which the PACs were allotted RIL equity shares on exercise of warrants. Likewise, since the promoters and PACs have not made any public announcement for acquiring shares, it is alleged that they have violated the provisions of regulation 11(1) of Takeover Regulations. 

Subsequently, while passing the order the Adjudicating Officer of the SEBI, observed: “that the Noticees by not making a public declaration has violated and have been continuing to violate the provisions of Regulation11(1) of the Takeover Regulations”. The Adjudicating Officer continued and stated that “the Noticees by their failure to make a public announcement, deprived the shareholders of their statutory rights/ opportunity to withdraw from the company” besides this, the Adjudicating Officer also mentioned that “the acquisition of shares which gives rise to voting rights thereon is a continuous infringement of the bar in law contained in Regulation 11 as the Acquirers and Persons acting in Control are not “entitled” to lawfully exercise the voting rights based on such a null and void acquisition. Besides the Adjudicating Officer also alleged that “violation of the regulation cannot be considered as anything but an ongoing failure to give the public announcement of the open offer as required under Regulation 11(1) of the Takeover Regulations”. 

In the background in the instant case, the violation was not 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 enhanced control by the exercise of voting rights, etc and these are violations that 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 offer being a consequential and necessary part thereof, which was absolute. Such a failure is a continuing violation till discharge”. 

Lastly, the market regulator held that the violation of Regulations11(1) of the Takeover Regulations makes them liable for penalty under Section 15H of the SEBI Act, 1992.

The penalty has been imposed jointly and severally on Mukesh Ambani, Anil Ambani, Nita Ambani, Tina Ambani, and fifteen other members of the Ambani Family and few Reliance entities. The penalty has to be deposited within 45 days. 

Needful to note that some of the noticees, such as 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. Referring to Section 8 of the Hindu Minority and Guardians Act, the SEBI held that Mukesh and Anil were the natural guardians of their children. Hence, they were liable on account of the violation of the shares held by their children, who were minors on the date of violation. “I note that the respective Noticees who are the Natural Guardians of the aforesaid minor Noticees are responsible not only on their behalf but also on behalf of the minors”, the Adjudicating Officer concluded while passing the order.

Sneh Somani
Experienced Legal Research Assistant with a demonstrated history of working in the law practice industry. Skilled in Journalism, Research, and Writing. Strong legal professional with a bachelor of arts and law focused in Law from Symbiosis Law School, NOIDA. Engrossed work in Gender studies and Women Empowerment and Contemporary Issues.