Supreme Court dismisses 1994 Sebi appeal against Ambani's Reliance entities

SC dismisses Sebi's appeal against Reliance Investment Holdings, Mukesh, and Anil Ambani over 1994 takeover norms breach, citing 'inordinate delay' in the regulator's actions

The Supreme Court on Monday dismissed an appeal by the Securities Exchange Board of India (Sebi) against Reliance Investment Holdings and its promoters, including Mukesh and Anil Ambani, over alleged violations of takeover regulations linked to a 1994 transaction. The appeal was dismissed by a bench comprising Justices J B Pardiwala and R Mahadevan, who criticised Sebi for the ‘inordinate delay’ in addressing and litigating the matter.

 

Justice Pardiwala said, “We are in November 2024 now, and this appeal was only filed in 2023 for a transaction dating back to 1994. There has to be an end to this dispute.”

 

Sebi’s legal team argued that procedural issues in the appeal had been resolved in time, but the Court rejected these arguments and dismissed the case.

 

Background of case

The case originated from Reliance Industries Limited’s (RIL) issuance of Non-Convertible Secured Redeemable Debentures (NCDs) with detachable warrants in 1992, approved by shareholders. On January 12, 1994, RIL allocated 60 million NCDs, each valued at Rs 50, to 34 entities, along with 30 million warrants, which were listed on the stock exchange. These warrants entitled holders to two equity shares of RIL for Rs 150 each within six years.

 

In January 2000, RIL’s board converted the warrants, allocating 120 million equity shares to holders, resulting in a 6.83 per cent increase in shareholding by promoters and associates, which RIL disclosed in April 2000. Sebi initially accepted the disclosure without action but later received complaints alleging violations of takeover regulations. It issued a show-cause notice in 2011, nearly two decades after the initial transaction.

 

RIL and its promoters filed a consent application in 2011 to settle the matter, which Sebi rejected in 2020. Subsequently, Sebi imposed a Rs 25 crore penalty in 2021. The Securities Appellate Tribunal (SAT) later overturned this order, citing Sebi's "inexplicable and inordinate delay" and concluding no regulatory violations had occurred. SAT directed Sebi to refund the Rs 25 crore penalty within four weeks.

 

With the Supreme Court’s dismissal of Sebi’s appeal, the matter appears to be conclusively resolved after nearly three decades of legal proceedings.