SEBI, the market regulator, has barred Anil Ambani as well as 24 others including former key officials of Reliance Home Finance from participating in the securities market for five years after allegedly misusing company funds.
Ambani was punished with a fine of Rs 25 crore and banned from being associated with the securities market as either a director or Key Managerial Personnel (KMP) in any listed company or any intermediary registered with the market regulator for five years.
Moreover, SEBI suspended Reliance Home Finance from securities trading for six months and imposed a penalty of INR 600000 on it.
In its final order of 222 pages, SEBI found that Anil Ambani had orchestrated an elaborate scam through his top managers to drain RHFL by routing it through loans to his entities that were dressed like genuine streaming activities.
Even though the Board of Directors of RHFL issued strong directives against these lending strategies and regularly reviewed corporate advances, such orders were disregarded by management.
This is indicative of significant governance failure orchestrated by some KPM personnel under Anil Ambani’s spell.
Therefore, it is inappropriate to hold the organization accountable for actions carried out by individuals who perpetrated fraud within its ranks itself.
Similarly, the rest have either been recipients of unlawfully obtained loans or conduits used in channeling monies illegally away from RHFL,” said SEBI.
According to SEBI’s findings; “there existed a fraudulent scheme hatched by Noticee No.2 [Anil Ambani] which was operated by KMPs of RHFL seeking to siphon off funds from its public listed firm (RHFL) via structuring them as ‘loans’ to unworthy conduit borrowers who are also onward lenders found to be promoter linked entities i.e., entities connected with Noticee No.2 [Anil Ambani].”
Mr. Ambani used his position as ‘chairperson of the ADA group’ and his significant indirect shareholding in the holding company of RHFL to orchestrate the fraud.
The regulator, Sebi noted that the management and promoter of the firm were approving loans worth hundreds of crores to companies that had no or meager assets, cash flow, net worth or revenues .
This suggests a sinister objective behind the ‘loans’. Moreover, most such borrowers happened to be closely connected with promoters of RHFL; a fact that makes it all even more suspicious.
Ultimately, most of these borrowing entities defaulted on their loans forcing RHFL into its own default under RBI Frameworks which left public shareholders in a bad state.
For example on March 2018, RHFL’s stock price was approximately INR 59.60 but by March 2020 when magnitude of the fraud started unfolding with subsequent depletion in resources for business activities leading to death spiral the price per share went down as low as INR 0.75
Even today about nine lakh shareholders are still invested in RHFL suffering large losses.
These 24 restricted entities include former officials linked to Reliance Home Finance Ltd (RHFL) who have been fined by Sebi for their role in this matter.
On the other hand, Ambani was fined INR 250 million, Bapna was fined for 270 million, Sudhalkar got a fine of INR 260 million and Mr. Shah was fined for 210 million.
More so, penalties amounting to INR 250 million each were also imposed on the remaining entities: 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 fines have been imposed on these for either accessing unlawfully acquired loans or serving as intermediaries in diverting funds from RHFL through illegal means.
In February 2022 SEBI restrained Anil Ambani’s firm (Reliance Home Finance), himself as an individual and three other individuals (Amit Bapna, Ravindra Sudhakar and Pinkesh R Shah) from the securities market until further orders by passing an interim order due to alleged misappropriations of funds from the company.
