The Securities and Exchange Board of India (SEBI) has barred industrialist Anil Ambani and 24 others, including former key executives of Reliance Home Finance, from the stock market for five years in connection with misappropriation of company funds.
SEBI also imposed a fine of Rs 25 crore on Ambani. Ambani has also been banned for five years from holding any directorship or key management position (KMP) in any listed company or any entity registered with the market regulator.
Apart from this, a fine of between Rs 21-25 crore has been imposed on 24 units. The regulator also banned Reliance Home Finance from the stock market for six months and imposed a fine of Rs 6 lakh on it.
No response was received to the email sent to the Anil Ambani-led Reliance Group in this regard. After receiving several complaints of alleged misappropriation of funds from Reliance Home Finance Limited, SEBI conducted an investigation for the fiscal year 2018-19 to detect any regulatory violations.
These revelations emerged in the SEBI investigation.
The SEBI investigation found that Anil Ambani had given money to RHFL’s KMPs Amit Bapna, Ravindra Sudhalkar and Pinkesh R. With the help of Shah, a fraud was planned to withdraw money from the company. In this, this money was shown as loan to the company’s associate units. Although the board of directors of RHFL had issued strict instructions to stop such lending practices and had conducted regular reviews of corporate loans, the company’s management ignored these orders.
Further, the remaining entities have either played the role of recipients of illegally obtained loans or facilitated the process of illicit diversion of funds from RHFL, the regulator said. SEBI said that as per its findings, “a conspiracy to commit fraud was hatched by the noticee No. 2 (Anil Ambani) and executed by KMP of RHFL.” “Through this conspiracy, funds of the listed company (RHFL) were diverted and given as ‘loans’ to ineligible borrowers who were found to be promoters of entities associated with the noticee No. 2 (Anil Ambani).”
Anil Ambani accused of fraud
Ambani used his position as “chairman of ADA group” and his significant indirect stake in the RHFL holding company to perpetrate the fraud, SEBI, in its 222-page order on Thursday, directed the management of the company and highlighted the negligent attitude of the promoters, through which they approved loans worth hundreds of crores of rupees to companies that had no assets, cash flows, “net worth” or revenue.
According to the order, this shows that there was some dangerous motive behind the “loan”. SEBI said that the situation becomes even more suspicious when we consider that many of these borrowers are closely associated with the promoters of RHFL. According to the regulator, most of these borrowers are ultimately unable to repay their bad loans, resulting in RHFL defaulting on its own debt obligations. This led to the resolution of the company under the Reserve Bank of India (RBI), putting its public shareholders in a difficult position.
For instance, in March 2018, the share price of RHFL was hovering around Rs 59.60. By March 2020, when the extent of the fraud became apparent and the company’s resources were exhausted, the share price fell to just 75 paise. Even now, over nine lakh people have invested in RHFL and are facing huge losses. SEBI has imposed a five-year ban on these 25, including Ambani and former officials, from “accessing the securities market and buying, selling or otherwise transacting securities directly or indirectly.”
Ambani fined millions of rupees
Ambani and the three former RHFL executives — Bapna, Sudhalkar and Shah — have been barred from holding “directorship or key management position (KMP) in any listed company or any SEBI-registered entity” while associated with the securities market for a period of five years. Apart from this, the regulator has imposed a fine of Rs 25 crore on Ambani, Rs 27 crore on Bapna, Rs 26 crore on Sudhalkar and Rs 21 crore on Shah.
Additionally, a fine of Rs 25 crore each was imposed on the remaining entities including Reliance Unicorn Enterprises, Reliance Exchange Next LT, Reliance Commercial Finance Limited, Reliance Cleangen Limited, Reliance Business Broadcast News Holdings Limited and Reliance Big Entertainment Private Limited.
Market regulator SEBI had passed an interim order in February 2022 and booked Reliance Home Finance Limited, industrialist Anil Ambani and three others (Amit Bapna, Ravindra Sudhakar and Pinkesh R. Shah) for allegedly diverting company funds from participating in the securities market in any manner until further orders.
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