Markets regulator Sebi has banned industrialist Anil Ambani from the securities market for five years after concluding that he engineered a fraudulent scheme to siphon off funds from Reliance Home Finance. Ambani had declared himself bankrupt before a UK court back in February 2020.
In addition, the regulator fined Ambani a whooping Rs. 25 crore and barred him for five years from having any affiliation with the securities market, including as a director or Key Managerial Personnel (KMP) in any listed company or market regulator-registered intermediary.
Complete Breakdown of Governance
By preponderance of evidence, Anil Ambani is the mastermind behind the fraudulent scheme, according to Sebi’s investigation into the case following several allegations of money diversion in Reliance Home Finance (RHFL) during FY 2018–19.
The company’s management has blatantly disregarded the directive of its own board, which had expressed concerns about GPCL (general purpose working loan) lending, according to Sebi.
“The facts of this case is particularly disturbing since it reveals complete breakdown of governance in a large listed company apparently orchestrated by and/or at the behest of the promoter aided by the indulgent KMPs of the company,” Sebi said.
The regulator also prohibited 24 other organizations, including former senior executives of the company, from the securities market for a period of five years in the 222-page final ruling on the matter. In addition, RHFL has been directed to pay a fine of Rs 6 lakh and has been banned from the securities market for six months.
Loans Having A Dark Purpose
Three former senior RHFL officials, Amit Bapna, Ravindra Sudhalkar, and Pinkesh R Shah, are among the 24 restrained entities. The regulator fined Bapna Rs. 27 crore, Sudhalkar Rs. 26 crore, and Shah Rs. 21 crore. Reliance Unicorn Enterprises, Reliance Exchange Next Lt, Reliance Commercial Finance Ltd, Reliance Cleangen Ltd, Reliance Business Broadcast News Holdings Ltd.
According to the investigation’s findings, Anil Ambani and other important RFHL managers embezzled money from the listed company (RHFL) by presenting the funds as “loans” to credit-worthy conduit borrowers who were then repaid by other borrowers who were discovered to be “promoter linked entities.”
In its ruling, Sebi observed that the promoter and management of the company had taken a careless stance while granting loans totalling hundreds of crores to businesses with negligible to no revenue, cash flow, assets, or net worth. This implies that the ‘loans’ have a dark purpose. The fact that several of these debtors had close ties to the RHFL promoters raises even more suspicions about the scenario.
