Ambani has been fined Rs 25 crore by Sebi, and he has been barred for a period of five years from having any affiliation with the securities market, including as a director or Key Managerial Personnel (KMP) in any listed company or market regulator-registered intermediary.
Due to the diversion of funds from the company, market regulator Sebi has prohibited industrialist Anil Ambani and 24 other entities, including key officials from Reliance Home Finance, from trading in the securities market for a period of five years.
Ambani has been fined Rs 25 crore by Sebi, and he has been barred for a period of five years from having any affiliation with the securities market, including as a director or Key Managerial Personnel (KMP) in any listed company or market regulator-registered intermediary.
Additionally, Reliance Home Finance was fined Rs 6 lakh by the regulator and prohibited from the securities market for a period of six months.
Sebi concluded in its 222-page final order that Anil Ambani had hatched a fraudulent plan to embezzle money from RHFL by passing it off as loans to entities connected to him, with the assistance of important managerial staff at the company.
The management of RHFL disregarded the firm directives from the Board of Directors to cease these lending practices and to conduct routine reviews of corporate loans.
This points to a serious governance failure that may have been caused by a few influential managers who were influenced by Anil Ambani.
In light of these facts, it is not appropriate to hold RHFL, the company, and the fraudsters equally accountable.
Additionally, the regulator stated that the remaining entities had either served as conduits to allow the illegal diversion of funds from RHFL or as recipients of loans obtained illegally.
The Securities and Exchange Board (Sebi) stated that its findings “existence of a fraudulent scheme, orchestrated by Noticee No. 2 (Anil Ambani) and administered by the KMPs of RHFL, to siphon off funds from the public listed company (RHFL) by structuring them as ‘loans’ to credit unworthy conduit borrowers, and in turn, to onward borrowers, all of whom have been found to be ‘promoter linked entities’ i.e. entities associated/ linked with Noticee 2 (Anil Ambani)” .
The ‘chairperson of the ADA group’ status and his substantial indirect shareholding in RHFL’s holding company were used by Ambani to plan the scam.
In its order on Thursday, Sebi noted the careless way in which the promoter and management of the company approved loans totaling hundreds of crores to businesses with negligible to no revenue, cash flow, assets, or net worth.
This implies that the ‘loans’ have a dark purpose. The fact that many of these borrowers had close ties to the RHFL promoters raises even more suspicions about the situation.
When the majority of these borrowers eventually stopped making loan payments, RHFL was forced to default on its own debt. Due to this, the company had to be resolved under the RBI Framework, which put its public shareholders in a challenging situation.
For instance, the share price of RHFL was approximately Rs 59.60 in March 2018. By March 2020, the share price had dropped to just Rs 0.75 as the extent of the fraud became apparent and the company ran out of resources.
More than 9 lakh investors in RHFL are still there despite suffering large losses.
Amit Bapna, Ravindra Sudhalkar, and Pinkesh R Shah, three former senior officials of Reliance Home Finance Ltd (RHFL), are among the 24 entities under restraint. Sebi has fined them for their involvement in the case.
Additionally, the regulator fined Ambani Rs. 25 crore, Bapna Rs. 27 crore, Sudhalkar Rs. 26 crore, and Shah Rs. 21 crore.
A fine of Rs 25 crore has also been imposed on each of the remaining companies, which include 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.
They have been subject to these fines because they either accepted the loans that were obtained illegally or served as middlemen to enable the unlawful withdrawal of funds from RHFL.
For allegedly siphoning off funds from the company, markets watchdog Sebi passed an interim order in February 2022 and restrained industrialist Anil Ambani, Reliance Home Finance Ltd., and three other individuals (Amit Bapna, Ravindra Sudhakar, and Pinkesh R Shah) from the securities market until further orders.
