SEBI action on Anil Ambani :Market regulator SEBI has banned industrialist Anil Ambani and 24 others, including former top officials of Reliance Home Finance (RHFL), from the securities market for five years in connection with the case of misappropriation of funds from the company. SEBI has imposed a fine of Rs 25 crore on Ambani and banned him from engaging in the securities market for a period of 5 years. This includes being involved as a director or key managerial personnel (KMP) in any listed company or any intermediary registered with SEBI.
Apart from this, SEBI has banned Reliance Home Finance from the securities market for 6 months and imposed a fine of Rs 6 lakh on them. In its 222-page final order, SEBI found that Anil Ambani, with the help of key managerial personnel of RHFL, hatched a fraudulent conspiracy to siphon off funds from RHFL by showing it as loans to his affiliated entities.
Big mistake in working method
Although the board of directors of RHFL had issued strict instructions to stop such lending practices and conducted regular reviews of corporate loans, the company’s management ignored these orders. According to SEBI, this shows that there was a major lapse in the way of functioning, which was done by some key managerial personnel under the influence of Anil Ambani.
Case of illegally obtaining loan
Apart from this, the remaining entities have either played the role of recipient of illegally obtained loans or played a role in illegally diverting money from RHFL, the regulator said. SEBI said that according to its conclusion, a conspiracy of fraud was hatched by Noticee No. 2 (Anil Ambani) and executed by KMP of RHFL.
misappropriation of funds
Through this conspiracy, funds were siphoned off from a public listed company (RHFL) and given as ‘loans’ to ineligible borrowers who were found to be promoters of entities linked to Noticee No. 2 (Anil Ambani). Ambani used his position as chairman of the ADA Group and his significant indirect shareholding in the holding company of RHFL to perpetrate the fraud.
Careless attitude of management and promoter
In its order, SEBI mentioned the negligent attitude of the company’s management and promoter, under which they sanctioned loans worth hundreds of crores of rupees to companies that had neither assets, nor cash flow, ‘net worth’ or revenue. According to the order, this shows that there was some wrong 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.
RHFL had to default
Eventually, most of these borrowers failed to repay their loans, leading RHFL to default on its own loan obligations, according to the regulator. This led to the company’s resolution under the RBI framework, leaving its public shareholders in a difficult position. For instance, in March 2018, RHFL’s share price was around Rs 59.60. By March 2020, when the extent of the fraud became clear and the company’s resources were exhausted, the share price fell to just Rs 0.75. Even now, more than nine lakh people have invested in RHFL and are suffering huge losses.
These people were banned
The 24 people banned include former Reliance Home Finance Limited (RHFL) chief executives Amit Bapna, Ravindra Sudhalkar and Pinkesh R Shah. SEBI has also imposed a fine on them for their role in the case. 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, 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 have been fined Rs 25 crore each.
