The SAT overturned Apollo Tyres' SEBI punishment in the 2003 share buyback case

28 Sep 2023 , 01:59 PM

The Securities and Exchange Board of India’s (SEBI’s) order fining Apollo Tyres Rs 65 lakh for breaking the rules governing share buybacks in 2003 was overturned by the Securities Appellate Tribunal (SAT) on Wednesday. The market regulator was then ordered to refund the deposited penalty amount within four weeks.

The appeal was made in response to the SEBI’s ruling from November 2018 fining Apollo Tyres Rs 65 lakh for breaking the buyback rules.

It was stated that Apollo Tyres’ corporation and promoters bought back 36.90 lakh shares in violation of the relevant Companies Act clause and SEBI rules.

The market regulator had said that Apollo Tyres had not adhered to any of the procedures for repurchasing shares as laid out in the buyback legislation.

A firm may repurchase shares in accordance with Regulation 4(1) of the Buyback Act through a tender offer, the open market, a book-building procedure through a stock exchange, and from holders of odd-lot shares.

After the Supreme Court upheld the sale of 36.90 lakh shares, SEBI was not required to investigate any potential violations of the Buy-Back Regulations or Section 77 of the Companies Act or to levy a penalty. We believe that once the sale of 36.90 lakhs was upheld by the Supreme Court, the alleged violation was waived. Neither the intervener’s claim of a violation nor SEBI’s right to impose a fine for the alleged violation was still open, the SAT bench of Justice Tarun Agarwala and presiding officer Meera Swarup said.

‘The contested order is overturned because it cannot be upheld. The appeal is granted without a cost order. The SAT stated, ‘We have been told that the appellant has deposited the penalty amount under protest.

‘Since we have quashed the order, the respondent (SEBI) is directed to refund the amount within 4 weeks from today.’

The decision was made in 2018 after the SAT ordered the market regulator to issue a new order and set aside the over Rs 1 crore fine that the SEBI had imposed on Apollo Tyres in the related case in January 2017.

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