The Securities and Exchange Board of India (SEBI) has banned Anil Ambani and 24 other entities, including former key officials of Reliance Home Finance Ltd (RHFL), from the securities market for five years for diversion of funds from the company.
The regulator has also imposed a hefty penalty of ₹25 crore on Ambani and restrained him from being associated with the securities market including as a director or Key Managerial Personnel (KMP) in any listed company, or any intermediary registered with the market regulator, for a period of five years.
Besides, RHFL has also been barred from the securities market for six months and asked to pay a fine of ₹6 lakh.
The 24 restrained entities include former key officials of RHFL — Amit Bapna, Ravindra Sudhalkar and Pinkesh R Shah. The regulator levied a fine of Rs 27 crore on Bapna, ₹26 crore on Sudhalkar and ₹21 crore on Shah.
Additionally, the remaining entities including Reliance Unicorn Enterprises, Reliance Exchange Next Lt, Reliance Commercial Finance Ltd, Reliance Cleangen Ltd, Reliance Business Broadcast News Holdings Ltd and Reliance Big Entertainment Private Ltd have been imposed a penalty of ₹25 crore each.
The total penalty on Ambani and other 24 entities works out to over ₹625 crore.
Following the news, shares of Anil Ambani Group companies fell sharply. Reliance Power and Reliance Home Finance shares prices were 5% down and hit the lower circuit. While Reliance Infrastructure fell up to 14% and closes 10% down.
After multiple complaints of funds diversion in Reliance Home Finance (RHFL) during FY 2018-19, Sebi investigated the matter and found that Anil Ambani is the mastermind behind the fraudulent scheme by a preponderance of probability.
The SEBI investigation found that 62 loans, worth ₹5,552.67 crore or 65.5% of the total amount under investigation, got approved on the date of the loan application, and 27 loans worth ₹1,940.6 crore got disbursed to the borrowers on the date of the application as well.
“Investigation in the matter has concluded that the Notices were involved in perpetrating a fraudulent scheme by disbursing general purpose working capital (GPC) loans resulting in erosion of the company’s finances due to such loans eventually being declared NPA,” the order signed by SEBI Whole Time Member Ananth Narayan G said.
“The fraudulent loans, which were disbursed as general-purpose working capital loans, led to a significant erosion of RHFL’s finances, Sebi said. “Most of the GPCL borrowers’ accounts turned NPAs and as a consequence of the same, RHFL defaulted in its payment obligations towards its lenders which has culminated in its Resolution under RBI Framework. As a result, the company’s public shareholders have been left high and dry,” the order said.
“It is apparent that notices 3 to 5, KMPs of the company, played an active role in perpetrating the fraudulent scheme,” the order said. While Noticee No. 2 was not a director in RHFL, he has used his position as ‘Chairperson of the ADA group’ and his significant indirect shareholding in the holding company of RHFL to orchestrate the fraud thereby not just adversely affecting RHFL’s stakeholders but also the confidence in the integrity of governance structures in regulated financial sector entities,” the order said.
“As per material available on record, subsequently, the entire outstanding of the GPCL lending of INR 6931.31 crore as on September 30, 2021 has been classified as NPA. RHFL has disclosed that GPCLs were secured against tangible and intangible assets,” SEBI said.
