The
Securities and Exchange Board of India (SEBI) has imposed a five-year ban on
industrialist Anil Ambani from participating in the securities market and has
levied a substantial fine of ₹25 crores due to the diversion of funds from
Reliance Home Finance Ltd. (RHFL). SEBI has also barred RHFL, along with
several connected entities and former officials, from the capital markets for
the same duration. In total, 27 entities have been fined, with payment required
within 45 days of receiving the order.
Anil
Ambani is prohibited from associating with the securities market in any
capacity, including as a director or Key Managerial Personnel (KMP) in any
listed company, holding or associate company of any listed company, or in any
SEBI-registered intermediary for five years.
SEBI’s
investigation revealed that during FY18-19, RHFL approved and disbursed a
series of large General Purpose Capital (GPC) Loans, totalling thousands of
crores of rupees, to borrowers with extremely weak financial profiles. These
borrowers had minimal or negative net worth, profits, assets, and cash flows
compared to the size of the loans they received.
RHFL
deviated repeatedly from standard credit due diligence practices when approving
these loans. All the borrowers and the entities receiving funds were connected
to the promoter group, with some loans backed by post facto guarantees from
promoter-group companies, highlighting the connection.
SEBI
determined that this was part of a scheme to divert funds from RHFL to
promoter-linked entities. In the judgment, SEBI Whole Time Member Ananth
Narayan G stated:
"The
only reasonable explanation for these otherwise inexplicable decisions is that
they were part of an elaborate and fraudulent scheme to divert funds from RHFL
to entities linked to the promoters, while concealing the financial impact from
the investing public. This scheme resulted in the siphoning of several
thousands of crores of rupees from RHFL, nearly half of the company's assets,
leading to the company's collapse and significant losses to its investors and
ecosystem."
SEBI
found that Anil Ambani played a key role in the activities of Reliance ADAG and
was specifically involved in the fraudulent scheme. The regulator concluded
that Ambani was "the mastermind behind the scheme."
SEBI
further noted that the GPC loans were either directly or indirectly channelled
to entities related to the Reliance ADA Group.
The
irregular and hasty manner of disbursing these loans, the involvement of senior
officials in promoting these loans, the lack of interest in recovering the
dues, and Anil Ambani’s role in approving the loans all pointed to a deliberate
intent to transfer funds. The ownership and management patterns of the involved
companies supported the conclusion that these loans were intended to benefit
the promoter group.
While
SEBI acknowledged that inter-corporate loans and related party transactions,
when properly disclosed and compliant with the law, are not inherently illegal,
the case revealed an elaborate and coordinated scheme to funnel funds from a
public listed company to financially weak, privately held companies associated
with the Reliance ADA Group.
SEBI
emphasized that this case is particularly troubling due to the complete
breakdown in governance within a large listed company, seemingly orchestrated
by the promoter with the complicity of the company’s KMPs. Despite regulatory
oversight by NHB, RBI, and SEBI, the company failed to uphold high standards of
governance and blatantly ignored its Board's directives regarding GPC lending
and legal compliance.
