The Securities and Exchange Board of India (SEBI) has prohibited industrialist Anil Ambani and 24 other entities, including former top officials of Reliance Home Finance, from participating in the securities market for five years due to the diversion of funds from the company.
The market regulator has fined Ambani Rs 25 crore and prohibited him from participating in the securities market for five years. This ban includes serving as a director or Key Managerial Personnel (KMP) in any listed company or registered intermediary.
SEBI said in its comprehensive 222-page final order that Anil Ambani and top executives at RHFL carried out a fraudulent scheme to siphon funds from RHFL under the pretence of loans to entities connected to Ambani. Despite clear directives from the RHFL Board of Directors to cease such lending practices and regular oversight of corporate loans, management chose to ignore these orders.
The market watchdog found that the fraudulent scheme was carried out by Ambani and RHFL's Key Managerial Personnel, channelling funds through credit-unworthy conduit borrowers who were all connected to Ambani.
Additionally, SEBI highlighted that Anil Ambani exploited his role as the "chairperson of the ADA group" and his indirect stake in RHFL's holding company to facilitate this scheme.
SEBI highlighted that loans of hundreds of crores were approved for companies with minimal assets, cash flow, or revenue, indicating a deliberate intent behind these transactions. Most of these borrowers defaulted, leading to RHFL's debt default and subsequent resolution under the RBI Framework. This resulted in significant losses for public shareholders, including over 900,000 investors.
SEBI imposed penalties on 24 entities involved, including former RHFL officials Amit Bapna, Ravindra Sudhalkar, and Pinkesh R Shah, who played significant roles in the fraud. Ambani was fined Rs 25 crore, Bapna Rs 27 crore, Sudhalkar Rs 26 crore, and Shah Rs 21 crore.
Additional fines of Rs 25 crore were levied on several other entities, including Reliance Unicorn Enterprises, Reliance Exchange Next Ltd, Reliance Commercial Finance Ltd, Reliance Cleangen Ltd, Reliance Business Broadcast News Holdings Ltd, and Reliance Big Entertainment Pvt Ltd. These entities were either recipients of the diverted funds or intermediaries in the fraudulent diversion of RHFL’s resources.
This ruling follows SEBI's interim order from February 2022, which had already barred RHFL, Anil Ambani, and three others from the securities market for allegedly diverting funds from the company.
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