Sebi Bans Former Religare Finvest CEO For Two Years. Here's What Happened

The case against Former Religare Finvest CEO is related to the diversion of funds amounting to Rs2,473.66 crore of Religare Finvest Ltd (RFL), a subsidiary of Religare Enterprises

Sebi banned the former CEO of Religare Finvest Ltd Kavi Arora from the securities market for two years

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The Securities and Exchange Board of India (SEBI) has banned the former CEO of Religare Finvest Ltd Kavi Arora from the securities market for two years and imposed a fine of Rs5 crore in connection with a case of fund diversion.

The case against Arora is related to the diversion of funds amounting to Rs2,473.66 crore of Religare Finvest Ltd (RFL), a subsidiary of Religare Enterprises Ltd (REL), from the financial year 2014-15 until 2017-18, in the garb of loans through layers of entities for the ultimate benefits of entities controlled by the erstwhile promoters – Malvinder Mohan Singh and Shivinder Mohan Singh, according to the news agency PTI report.

Here's what happened

Ananta Barua, Sebi Whole Time Member in the final order stated Arora was "involved knee-deep in the perpetration of a scheme of diversion of funds." Arora served as CEO and MD of RFL from November 14, 2011 before he resigned in 2017. The alleged diversion of funds happened during the period from the financial year 2014-15 to 2017-18.

In his order, Barua mentioned there is ample material on record to hold that Arora gave his consent to the approval of fresh loans under Corporate Loan Book (CLB) and even evergreening of certain loans under CLB, despite repeated and specific adverse comments by RBI, ICRA and some lending banks.

The financial statements of RFL were consolidated with the financial statements of REL on a quarterly basis. The diversion of funds was kept hidden from the shareholders of REL, which misled them to remain invested in the shares of Religare or deal in the securities of REL, Barua said.

Arora has been banned from getting associated with the securities market, including as a director or Key Managerial Personnel in a listed company or a Sebi-registered intermediary.

A fine of Rs5 crore has also been imposed on Arora. SEBI had passed an interim order on March 14, 2019, and a confirmatory order in September 2019 with respect to alleged diversion of around ₹2,315.09 crore from Religare Enterprises Ltd (REL)/ RFL for the benefit of promoter/promoter connected entities.