The Securities and Exchange Board of India (SEBI) has imposed a five-year ban on industrialist Anil Ambani and 24 other entities for the diversion of funds from Reliance Home Finance Ltd (RHFL).
In addition to the ban, SEBI has fined Ambani Rs 25 crore and prohibited him from holding any position in the securities market, including as a director or key managerial personnel in listed companies, for the same period.
SEBI's action follows an investigation revealing a fraudulent scheme orchestrated by Ambani and executed by RHFL executives. The scheme involved diverting funds from RHFL under the guise of loans to companies linked to Ambani, which had little financial standing.
Here are the key reasons for the markets regulator's action:
The SEBI investigation uncovered a fraudulent scheme orchestrated by Anil Ambani and executed by key RHFL executives, who diverted funds from the publicly listed company by presenting them as loans to credit-unworthy conduit borrowers linked to Ambani.
A total of Rs 8,800 crore was diverted to group companies and related entities, which included firms like Reliance Capital Ltd., Reliance Commercial Finance Ltd., Reliance Power Ltd., and Reliance Infrastructure Ltd. These companies had minimal assets, cash flow, net worth, or revenue.
Many of these borrowers defaulted on their loans, causing RHFL to default on its debt obligations and leaving its public shareholders significantly impacted.
The market regulator's findings were corroborated by forensic audits conducted by PwC, the statutory auditor of RHFL, and Grant Thornton, appointed by Bank of Baroda, the lead bank in the consortium of RHFL lenders, both identifying similar violations.
Despite strong directives from the RHFL board to cease such lending practices, Anil Ambani, leveraging his role as chairperson of the Anil Dhirubhai Ambani Group, ignored these orders.
SEBI’s detailed 222-page order stated that Ambani, with RHFL’s key personnel, orchestrated a fraudulent scheme to divert funds, disregarding board directives and failing to maintain proper governance.
The other 24 barred entities include Amit Bapna, Ravindra Sudhalkar, and Pinkesh R. Shah, former RHFL officials, who have been fined Rs 27 crore, Rs 26 crore, and Rs 21 crore respectively. Additionally, Reliance Unicorn Enterprises, Reliance Exchangenext Ltd, Reliance Commercial Finance Ltd, Reliance Cleangen Ltd, Reliance Business Broadcast News Holdings Ltd, and Reliance Big Entertainment Pvt Ltd have each been fined Rs 25 crore for their roles in receiving or facilitating the illegal diversion of funds from RHFL.
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