Industrialist Anil Ambani and 24 other entities, including former senior officials of Reliance Home Finance, have been barred from the securities market for five years by the markets regulator the Securities and Exchange Board of India (Sebi) for diverting funds from the company.
Ambani has been fined Rs 25 crore by Sebi and is banned for a period of five years from having any affiliation with the securities market, including acting as a director or Key Managerial Personnel (KMP) in any listed business or intermediary that is registered with the regulator.
In addition, Reliance Home Finance was fined Rs 6 lakh by the regulator and banned from the securities market for a period of six months.
In its 222-page final ruling, Sebi said that Anil Ambani and senior RHFL executives had planned a fraudulent scheme to syphon off funds from RHFL by pretending to lend it to firms affiliated with him.
The management rejected the RHFL Board of Directors’ clear directions to stop such lending practices and to frequently evaluate company loans.
Sebi came to the conclusion that Ambani and the RHFL KMPs were responsible for carrying out the fraudulent plan, which involved transferring money through conduit borrowers who were not creditworthy and were all connected to Ambani.
The market regular said that Anil Ambani carried out this plan by taking advantage of his role as the “chairperson of the ADA group” and his indirect ownership of shares in the holding company of RHFL.
Loans worth hundreds of crores were authorised for businesses with little to no assets, cash flow, or income, according to Sebi, which raises the potential that these loans were given with fraudulent intent. RHFL’s own debt default and ultimate resolution under the RBI Framework were caused by the majority of these borrowers’ defaults. Over 9 lakh investors, who are public shareholders, suffered large losses as a result.
The share price of RHFL fell rapidly when the fraud came to light, from Rs 59.60 in March 2018 to Rs 0.75 in March 2020.
Amit Bapna, Ravindra Sudhalkar and Pinkesh R Shah, three former RHFL officials who were involved in the scam, were among the 24 restricted entities that Sebi penalised. Ambani was fined Rs 25 crore, Bapna Rs 27 crore, Sudhalkar Rs 26 crore, and Shah Rs 21 crore.
Reliance Unicorn Enterprises, Reliance Exchange Next Ltd, Reliance Commercial Finance Ltd, Reliance Cleangen Ltd, Reliance Business Broadcast News Holdings Ltd and Reliance Big Entertainment Pvt Ltd were among the other firms on whom fines totalling Rs 25 crore were imposed.
These entities served as intermediaries in the fraudulent diversion of RHFL’s resources or as receivers of the syphoned funds.
The decision follows an interim order issued by Sebi in February 2022 that had previously banned RHFL, Anil Ambani and three other individuals from investing in shares due to allegations of fraud from the company.
