The Securities Appeals Court (SAT) this Friday suspended the decision of $Rs 25 crore fine imposed on Anil Dhirubhai Ambani Group (ADAG) chairman Anil Ambani for his alleged involvement in the Reliance Home Finance Ltd (RHFL) funds siphoning case.
“There should be no recovery of the amount of the fine ( $25 crore) subject to 50% deposit within four weeks,” a bench headed by Justice Dinesh Kumar said in its order.
The SAT issued a notice to the Securities and Exchange Board of India (Sebi), asking it to file a reply within four weeks.
However, a detailed order is awaited.
Anil Ambani had challenged the Sebi order of August 22, which banned him from participating in the stock market for five years and made him pay a fine of $25 crore for allegedly siphoning funds from RHFL by providing loans to borrowers linked to the promoters.
The regulator stated that it would assess the amount of illegal profits generated by the alleged fraudulent schemes and take appropriate action.
This matter relates to general purpose working capital loans (GPCL) that RHFL disbursed during 2018 and 2019. RHFL’s loan portfolio had increased dramatically from $3,742 crore in 2017-18 a $8,670 crore in 2018-19.
Sebi, in its investigation, found certain disclosure lapses and violations in RHFL.
Harish Salve, senior lawyer representing Ambani, asked for the sentence to be stayed. He informed the court that the order arises out of alleged violations of the Sebi Act and Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) rules.
“Not a single rupee has reached Anil Ambani’s account,” Salve argued, adding that Sebi did not even mention any purchase, sale or trading of securities by Ambani while passing the order.
On the other hand, Sebi argued: “Billions of rupees coming from $Between Rs 4,000 and 8,000 crore have been spent without following due process. The money has been allocated to related parties and sister companies of the ADA Group (also known as Reliance Group).”
“As ADAG chairman, Ambani sanctioned and signed all these loans worth billions of rupees,” it said. “That is the egregious nature of the errors mentioned in the impugned Sebi order.”
Sebi’s August order noted that during fiscal years 2018 and 2019, RHFL disbursed billions of rupees in GPC loans to entities with negative net worth and minimal assets. These loans were issued without any collateral, which represents a significant departure from standard credit due diligence.
RHFL management ignored internal credit ratings and waived the requirement to assess the likelihood of default, allowing these risky loans to proceed unchecked.
On the other hand, Sebi imposed fines of $27 crores for Amit Bapna, $26 crores on Ravindra Sudhalkar, and $21 crore to Pinkesh Shah, all key officials of RHFL.
Additionally, it fined several entities associated with the fraudulent scheme. $25 million rupees each.
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