Sebi bans Anil Ambani, 24 other entities from securities market

Markets regulator Sebi has barred industrialist Anil Ambani, 24 or entities, including former key officials of Reliance Home Finance from securities market for five years for diversion of funds from company.

Sebi has imposed a penalty of Rs 25 crore on Ambani and restrained him from being associated with securities market including as a director or Key Managerial Personnel (KMP) in any listed company, or any intermediary registered with market regulator, for a period of 5 years.

Also, regulator barred Reliance Home Finance from securities market for six months and slapped a fine of Rs 6 lakh on it.

In its 222-page final order, Sebi found that Anil Ambani, with help of RHFL's key managerial personnel, h orchestrated a fraudulent scheme to siphon-off funds from RHFL by disguising m as loans to entities linked to him.

Although Board of Directors of RHFL h issued strong directives to stop such lending practices and reviewed corporate loans regularly, company's management ignored se orders.

This suggests a significant failure of governance, driven by certain key managerial personnel under influence of Anil Ambani.

Given se circumstances, company RHFL itself should not be held equally responsible as individuals involved in fraud.

Furr, remaining entities have played role of being eir recipients of illegally obtained loans or conduits to enable illegal diversion of monies from RHFL, regulator noted.

Sebi said its findings have established "existence of a fraudulent scheme, orchestrated by Noticee No. 2 (Anil Ambani) and ministered by KMPs of RHFL, to siphon off funds from public listed company (RHFL) by structuring m 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 A group' and his significant indirect shareholding in holding company of RHFL to orchestrate fraud.

Sebi, in its order on Thursday, noted cavalier approach of company's management and promoter in approving  loans worth hundreds of crores to companies that h little to no assets, cash flow, net worth, or revenue.

This suggests a sinister objective behind 'loans'. situation becomes even more suspicious when considering that many of se borrowers were closely linked to promoters of RHFL.

Eventually, most of se borrowers failed to repay ir loans, causing RHFL to default on its own debt obligations. This led to company's resolution under RBI Framework, leaving its public shareholders in a difficult position.

For example, in March 2018, RHFL's share price was around Rs 59.60. By March 2020, as extent of fraud became clear and company was drained of its resources, share price h plummeted to just Rs 0.75.

Even now, over 9 lakh shareholders remain invested in RHFL, facing significant losses.

24 restrained entities include former key officials of Reliance Home Finance Ltd (RHFL) -- Amit Bapna, Ravindra Sudhalkar and Pinkesh R Shah -- and Sebi has imposed fine on m for ir role in case.

Also, regulator levied a fine of Rs 25 crore on Ambani, Rs 27 crore on Bapna, Rs 26 crore on Sudhalkar and Rs 21 crore on Shah.

ditionally, remaining entities including Reliance Unicorn Enterprises,  Reliance Exchange next Lt,  Reliance Commercial Finance Ltd, Reliance Cleangen Ltd, Reliance Business Brocast News Holdings Ltd and Reliance Big Entertainment Private Ltd have been imposed a penalty of Rs 25 crore each.

se fines have been levied on m for eir receiving illegally obtained loans or acted as intermediaries to facilitate illegal diversion of funds from RHFL.

In February 2022, markets watchdog Sebi h passed an interim order and restrained Reliance Home Finance Ltd, industrialist Anil Ambani and three or individuals (Amit Bapna, Ravindra Sudhakar and Pinkesh R Shah) from securities market till furr orders for allegedly siphoning off funds from company.