The Securities and Exchange Board of India (SEBI), a stock market regulator has imposed a penalty of INR25 crore on the Ambai brothers and firms connected to the promoter group for violation of takeover code regulations in the year 2000.
The holding of the Ambani family had been in RIL (Reliance Industries Limited) increased by 6.83 percent in January 200. The holding was increased by the conversion of warrants issued in 1994.
Though the promoter group failed to comply with the Substantial Acquisition of Shares and Takeovers (SAST) Regulations 1997 by not making an open offer which is mandatory in India.
“It is noted that in the instant matter the notices have been alleged to have failed to make a 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 notices make the instant matter grave,” SEBI has said in an order.
The fine imposed on Ambani Family will be jointly paid by 34 individuals entities who were allotted the warrants in the year 1994. These include brothers Mukesh and Anil Ambani, their mother, wife, and children.
Under Section 15H of the SEBI Act (amended in October 2002), a maximum penalty of Rs 25 crore or three times the amount of profits made out of the failure is allowed.
SEBI in the order said it was difficult to certain the unfairness again made by RIL promoter entities.
“…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 by the notices.”
In its reply to Sebi, the notices had argued that the initiation of adjudication proceedings in this case with a huge inordinate delay was “unreasonable, arbitrary and causes substantial prejudice to the notices.” They further argued that the “adjudication proceedings sought to be initiated against the notices ought to be dropped, on this ground alone.”
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