In a significant crackdown on financial misconduct, the Securities and Exchange Board of India (Sebi) has imposed a five-year ban on industrialist Anil Ambani and 24 other entities, including former senior officials of Reliance Home Finance Ltd (RHFL). The ban is a result of an elaborate investigation into the diversion of funds from the company.
Sebi’s latest order, released on Thursday, highlights a series of fraudulent activities orchestrated by Ambani and executed with the complicity of RHFL’s key managerial personnel. The regulator has also imposed a penalty of ₹25 crore on Ambani and barred him from holding any position in the securities market, including roles as a director or Key Managerial Personnel (KMP) in any listed company or intermediary registered with Sebi.
The action follows a comprehensive 222-page final order from Sebi, which detailed how Ambani, leveraging his position as chairperson of the ADA Group and his indirect shareholding in RHFL, orchestrated a scheme to siphon off funds from the company. The funds were disguised as loans to entities linked to Ambani, which were neither creditworthy nor capable of repaying the loans.
Despite directives from RHFL’s Board of Directors to halt such practices, the company’s management, influenced by Ambani, ignored these orders. This governance failure facilitated the fraudulent scheme, involving the diversion of funds through companies with minimal assets or revenue. Many of these borrowers were closely associated with RHFL’s promoters.
The fraudulent activities resulted in severe financial consequences for RHFL. The company’s share price, which stood at ₹59.60 in March 2018, plummeted to ₹0.75 by March 2020 as the extent of the fraud became evident. The company’s financial woes culminated in a resolution under the Reserve Bank of India’s (RBI) framework, leaving over 900,000 shareholders with substantial losses.
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In addition to the ban on Ambani, Sebi has also restricted Reliance Home Finance from participating in the securities market for six months and imposed a fine of ₹6 lakh on the company. The regulator has fined the remaining 24 entities involved, including former RHFL officials Amit Bapna, Ravindra Sudhalkar, and Pinkesh R. Shah, with penalties ranging from ₹21 crore to ₹27 crore based on their roles in the fraud.
Entities such as Reliance Unicorn Enterprises, Reliance Exchange Ltd., Reliance Commercial Finance Ltd., Reliance Cleangen Ltd., Reliance Business Broadcast News Holdings Ltd., and Reliance Big Entertainment Pvt. Ltd. have each been fined ₹25 crore for their roles in either receiving the illicit loans or facilitating the diversion of funds.
Sebi’s decision underscores its commitment to maintaining market integrity and combating financial fraud. The case serves as a stark reminder of the critical importance of transparent governance and accountability in the financial sector. With the final order, Sebi aims to deter similar fraudulent activities and protect investor interests in the future.
The investigation into this case highlights the challenges faced by regulators in addressing complex financial misconduct and emphasizes the need for robust mechanisms to ensure compliance and prevent abuse.
