New Delhi: Markets regulator Securities and Exchange Board of India (SEBI) has barred industrialist Anil Ambani and 24 other entities, including former key officials of Reliance Home Finance Limited (RHFL) from the securities market for five years for diversion of funds from the company.
SEBI has imposed a penalty of Rs 25 crore on Ambani and restrained him from being associated with the securities market including as a director or Key Managerial Personnel (KMP) in any listed company, or any intermediary registered with the market regulator, for a period of 5 years.
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In its 222-page final order, SEBI found that Anil Ambani, with the help of RHFL’s key managerial personnel, had orchestrated a fraudulent scheme to siphon-off funds from RHFL by disguising them as loans to entities linked to him.
Although the Board of Directors of RHFL had issued strong directives to stop such lending practices and reviewed corporate loans regularly, the company’s management ignored these orders. This suggests a significant failure of governance, driven by certain key managerial personnel under the influence of Anil Ambani.
Given these circumstances, the company RHFL itself should not be held equally responsible as the individuals involved in the fraud. Further, the remaining entities have played the role of being either recipients of illegally obtained loans or conduits to enable illegal diversion of monies from RHFL, the regulator noted.
SEBI said its findings have established the “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)”.
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.
SEBI, in its order on Thursday, noted the cavalier approach of the company’s management and promoter in approving loans worth hundreds of crores to companies that had little to no assets, cash flow, net worth, or revenue. This suggests a sinister objective behind the ‘loans’. The situation becomes even more suspicious when considering that many of these borrowers were closely linked to the promoters of RHFL.
