 "Sebi")
Markets regulator Sebi expects to decide at the "earliest" on settlement pleas filed by Reliance Industries and 27 other related entities in a case that allegedly involved Rs 900-crore worth transactions nearly 18 years ago when Ambanis still had an undivided business empire.
Sebi itself initiated adjudication and prosecution proceedings in the matter in 2010, while show-cause notices were issued next year in 2011 — the year when settlement applications were subsequently filed before the regulator.
The applicants included Reliance Industries as also virtually all members of the undivided Ambani family.
The matter is related to alleged lapses in issuance of debentures and their subsequent conversion into equity shares.
Sebi has attributed the 'delay' to litigation by some concerned entities, insistence of some for "privileged and confidential documents relating to the case", disputes raised by Reliance Industries Ltd (RIL) on certain portions of the investigation report and the difficulties faced in getting some important documents.
The regulator now hopes that the settlement applications involving this case would be disposed within 2-3 months.
"Efforts have already been made to dispose of the matter at the earliest at the most within 2-3 months. Internal Committee meetings are being scheduled in the matter regularly for quick disposal," Sebi has informed its board.
This is one of the six cases were settlement applications were pending at Sebi for a period of more than two years. Others include those relating to India Capital Markets Pvt Ltd, Vesuvius Holdings Ltd, ITI Financial Services Ltd, Liberty Phosphate Ltd and one by Anurag Agrawal, Omi Bagadiya, Shobha Bagadiya and Ritu Agarwal in the matter of Parichay Investments.
Among those, settlement order was passed in one case last month while Sebi is awaiting demand draft of the settlement terms in another case.
Steps have been taken to close all remaining cases at the earliest, Sebi said.
Sebi further said it has disposed of 1,402 applications by passing settlement orders till December 31, 2016, while as many as 1,218 pleas have been rejected during the same period.
At the end of 2016, Sebi had total 253 applications pending at various stages of settlement process, while 326 pleas were either withdrawn or became infructuous.
Regarding RIL, Sebi said a set of 28 settlement applications were filed by 28 entities (RIL and other related entities) in September 2011 for settling the adjudication proceedings initiated by show-cause notice dated February 2, 2011, and other violations communicated through letters issued in April-May 2010.
The matter related to RIL having issued 6 crore secured redeemable warrants to 34 entities allegedly promoted by RIL itself.
"In December 1999, Reliance and its related entities allegedly transferred Rs 90 crore to 38 companies including 34 allottee companies. On January 7, 2000, the board of RIL decided to convert warrants into equity shares in favour of said entities. The allottees paid Rs 900 crore to RIL towards subscription amount for conversion of warrants to underlying equity shares," according to the memorandum placed by Sebi before its board.
After investigating the matter and taking external legal opinion, Sebi decided to initiate adjudication and prosecution proceedings in December 2010.
While the adjudication proceedings were pending, Corporate Affairs Ministry in February 2012 informed Sebi that their inspection found "no funds were given RIL to 34 entities to which NCDs were allotted".
Later, some applicants requested for certain documents, while two applicants — Uditi Mercantile and Pams Investments — challenged the adjudication proceedings before Securities Appellate Tribunal (SAT).
The Tribunal however declined to intervene in the matter through an order passed in April 2013.
In the meantime, Sebi said, it continued to schedule its internal committee meetings to decide on the applications during which applicants requested for certain documents including investigation reports, while at times they also requested adjournments.
In June 2013, RIL also submitted a chartered accountant certificate that no funds were provided by the company to the 34 entities and also furnished detailed documents along with the bank statements.
In view of these submissions and the letter from the Corporate Affairs Ministry, the regulator again examined the matter vis-a-vis the criminal proceedings and an opinion was also sought from the Solicitor General of India, who advised Sebi to first dispose of the consent applications.
Consequently, Sebi's internal committee again took up the matter in its meetings in November 2015 and January 2016, wherein the applicants submitted the background of the issue of NCDs and subsequent conversion into equity shares and failure to report the changes in shareholding pattern.
The applicants also submitted the resolutions relating to the issue of NCDs passed in RIL's AGM and other documents, while they also made submissions on consentability of the alleged defaults.
The Sebi committee then sought original records from the stock exchanges, followed by further meetings with the representatives of the applicants and again with the stock exchanges during May-July 2016.
Applicants submitted additional documents in September 2016, including about the details of the amount transferred by the allottees of NCDs to RIL and the current status of the 38 allottees.
In January 2017, the Sebi committee met again to summarise the earlier discussions and the alleged violations, before their final discussion scheduled for this month.
Summarising the 'primary reason for the delay in the matter', Sebi listed the litigation by two entities before SAT, insistence of the applicants for the privileged and confidential documents relating to the case, and disputes raised by RIL on facts which were not dealt in the investigation report.
Sebi further said such disputes and submission of additional documents during the course of proceedings required re-examination of the matter and an opinion was sought from SGI as well.
Further, certain very old documents and information were required to be collected from the company and the exchanges as these were vital to decide on the settlement applications.
Since these were not readily available, it took some time to retrieve them, the regulator said.
