The Securities Appellate Tribunal (SAT) has ruled in favor of Apollo Tyres by quashing the ₹65 lakh penalty imposed on the company by the Securities and Exchange Board of India (Sebi) for alleged violations of buyback norms dating back to 2003. SAT’s decision comes after Apollo Tyres filed an appeal against Sebi’s order, which imposed the penalty in November 2018.
The allegations against Apollo Tyres revolved around the buyback of 36.90 lakh shares, which the company and its promoters were accused of conducting in violation of the relevant section of the Companies Act and Sebi regulations. Sebi argued that Apollo Tyres had not followed any of the prescribed methods for repurchasing shares as specified under the buyback regulation.
Under Regulation 4(1) of buyback rules, a company can buy back shares through a tender offer, open market transactions conducted through the book-building process via stock exchanges, or from odd-lot holders.
In its ruling, SAT cited the Supreme Court’s affirmation of the sale of 36.90 lakh shares, stating that once the sale had been upheld by the highest court, the question of Sebi investigating potential violations of Buy-Back Regulations or Section 77 of the Companies Act no longer applied. Therefore, the imposition of a penalty for alleged violations was deemed unwarranted.
A bench of SAT, comprising Justice Tarun Agarwala and presiding officer Meera Swarup, stated, “The impugned order cannot be sustained and is quashed. The appeal is allowed with no order as to costs. We have been informed that the penalty amount has been deposited by the appellant under protest.” SAT directed Sebi to refund the penalty amount within four weeks from the date of the ruling.
This decision marks the resolution of a long-standing legal dispute between Apollo Tyres and Sebi regarding the alleged buyback violations. The SAT’s ruling in favor of Apollo Tyres underscores the importance of legal due process and the need for regulatory authorities to demonstrate the clear violation of regulations before imposing penalties on companies.
