The Securities and Exchange Board of India (Sebi) has barred industrialist Anil Ambani and 24 other entities, including former key officials of Reliance Home Finance Ltd (RHFL), from the securities market for five years due to the diversion of funds from the company.
Sebi has imposed a penalty of Rs 25 crore on Ambani and has prohibited him from associating with the securities market, including serving as a director or key managerial personnel (KMP) in any listed company or intermediary registered with the market regulator, for a period of five years.
Additionally, Sebi has barred RHFL from the securities market for six months and levied a fine of Rs 6 lakh on the company.
In its 222-page final order, Sebi found that Anil Ambani, with the assistance of RHFL's key managerial personnel, orchestrated a fraudulent scheme to siphon funds from RHFL by disguising them as loans to entities linked to him.
Despite strong directives from the RHFL Board of Directors to cease such lending practices and regular reviews of corporate loans, the company’s management ignored these orders, highlighting a significant failure of governance driven by certain key managerial personnel under Ambani’s influence.
Sebi’s findings suggest that the company, RHFL, should not be held equally responsible as the individuals involved in the fraud. The remaining entities played roles as either recipients of illegally obtained loans or conduits facilitating the illegal diversion of funds from RHFL.
Sebi stated that its findings have established the "existence of a fraudulent scheme, orchestrated by Noticee No. 2 (Anil Ambani) and administered by the KMPs of RHFL, to siphon off funds from the public listed company (RHFL) by structuring them as 'loans' to credit unworthy conduit borrowers, and in turn, to onward borrowers, all of whom have been found to be 'promoter-linked entities', i.e., entities associated/linked with Noticee 2 (Anil Ambani)".
Ambani allegedly used his position as chairperson of the ADA Group and his significant indirect shareholding in the holding company of RHFL to orchestrate the fraud.
In its order on Thursday, Sebi noted the cavalier approach of the company's management and promoter in approving loans worth hundreds of crores to companies with little to no assets, cash flow, net worth, or revenue. This suggests a sinister objective behind the loans, particularly as many of these borrowers were closely linked to the promoters of RHFL.
Eventually, most of these borrowers failed to repay their loans, causing RHFL to default on its own debt obligations. This led to the company's resolution under the RBI Framework, leaving its public shareholders in a difficult position. For example, RHFL’s share price plummeted from around Rs 59.60 in March 2018 to just Rs 0.75 by March 2020 as the extent of the fraud became clear and the company was drained of its resources.
Currently, over 900,000 shareholders remain invested in RHFL, facing significant losses.
The 24 restrained entities include former key officials of RHFL—Amit Bapna, Ravindra Sudhalkar, and Pinkesh R Shah—who were fined for their roles in the case. Sebi has imposed a penalty of Rs 27 crore on Bapna, Rs 26 crore on Sudhalkar, and Rs 21 crore on Shah.
Moreover, penalties of Rs 25 crore each have been levied on other entities, including Reliance Unicorn Enterprises, Reliance Exchange Next Ltd, Reliance Commercial Finance Ltd, Reliance Cleangen Ltd, Reliance Business Broadcast News Holdings Ltd, and Reliance Big Entertainment Private Ltd. These fines are for either receiving illegally obtained loans or acting as intermediaries in the illegal diversion of funds from RHFL.
In February 2022, Sebi passed an interim order restraining RHFL, Anil Ambani, and three other individuals—Amit Bapna, Ravindra Sudhalkar, and Pinkesh R Shah—from the securities market until further orders, due to the alleged siphoning of funds from the company.
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