11 years after conversion of certain warrants into equity shares, SEBI issued a show cause notice to the promoters of Reliance Industries Limited (‘RIL’) and allottee entities in 2011 alleging irregularities in compliance with SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (‘SAST Regulations’).

12 years after the issuance of this show cause notice, the Securities Appellate Tribunal (‘SAT’) set aside SEBI’s order while holding that the Appellants did not violate the SAST Regulations and that the imposition of penalty of INR 25 crores is without any authority of law .^[1]

Briefly, SAT held that SAST Regulations are not retrospective in nature. The obligation to make a public announcement is triggered at the time of acquisition of the warrants and not at the time of conversion of such warrants into equity shares with voting rights. SAT also noted that there was a delay of 11 years for issuance of the show cause notice and a delay of 21 years by SEBI to pass an order against the alleged violation, due to which the SEBI order could be set aside.

AZB & Partners successfully represented the promoters of RIL and the allottee entities in this matter. This judgment is likely to benefit the clients in other related proceedings.

Access the order here.

[1] Appeal No.748 of 2021.