SEBI Bans Anil Ambani and 24 Other Entities for Five Years in Fund Diversion Case.

NEW DELHI: The Securities and Exchange Board of India (SEBI) has taken stringent action against industrialist Anil Ambani and 24 other entities, including former key officials of Reliance Home Finance Ltd (RHFL), by barring them from the securities market for five years due to their involvement in a fund diversion case.

SEBI imposed a penalty of ₹25 crore on Ambani and prohibited him from any association with the securities market, including serving as a director or Key Managerial Personnel (KMP) in any listed company or as an intermediary registered with SEBI, for the next five years.

In addition, SEBI barred RHFL from the securities market for six months and imposed a fine of ₹6 lakh on the company.

SEBI’s 222-page final order revealed that Anil Ambani, in collaboration with RHFL’s key managerial personnel, orchestrated a fraudulent scheme to siphon off funds from RHFL by disguising them as loans to entities linked to him.

Despite the Board of Directors of RHFL issuing clear directives to halt such lending practices and regularly reviewing corporate loans, the management chose to ignore these instructions. This pointed to a significant governance failure, influenced by certain key managerial personnel under Ambani’s control.

However, SEBI clarified that RHFL as a company should not be held equally responsible as those individuals directly involved in the fraudulent activities. The other restrained entities were either recipients of the misappropriated loans or intermediaries facilitating the illegal diversion of funds from RHFL.

SEBI’s findings confirmed the existence of a “fraudulent scheme” orchestrated by Anil Ambani and administered by RHFL’s key managerial personnel.

The scheme involved structuring loans to credit-unworthy conduit borrowers, who were later identified as entities linked to Ambani. Using his position as chairperson of the ADA Group and his significant indirect shareholding in RHFL’s holding company, Ambani was able to manipulate the company to execute the fraud.

The SEBI order highlighted the reckless approach of RHFL’s management and promoter in approving loans worth hundreds of crores to companies that lacked assets, cash flow, net worth, or revenue, suggesting a hidden motive behind these loans.

The situation was further compounded by the fact that many of these borrowers were closely associated with RHFL’s promoters. As expected, most of these borrowers failed to repay their loans, leading RHFL to default on its debt obligations.

This financial turmoil led to the company’s resolution under the RBI Framework, leaving public shareholders facing significant losses. For instance, RHFL’s share price plummeted from ₹59.60 in March 2018 to just ₹0.75 by March 2020 as the fraud was exposed, devastating the value for over 9 lakh shareholders who remained invested in the company.

The 24 entities restrained by SEBI include former RHFL key officials Amit Bapna, Ravindra Sudhalkar, and Pinkesh R. Shah, all of whom were fined for their roles in the case.

SEBI imposed fines of ₹25 crore on Ambani, ₹27 crore on Bapna, ₹26 crore on Sudhalkar, and ₹21 crore on Shah. Additionally, fines of ₹25 crore each were levied on entities such as Reliance Unicorn Enterprises, Reliance Exchange Next Ltd, Reliance Commercial Finance Ltd, Reliance Cleangen Ltd, Reliance Business Broadcast News Holdings Ltd, and Reliance Big Entertainment Private Ltd, either for receiving the illegally obtained loans or for acting as intermediaries in the illegal diversion of funds from RHFL.

This action follows SEBI’s interim order from February 2022, where Reliance Home Finance Ltd, Anil Ambani, and three other individuals were restrained from the securities market pending further investigation into the alleged siphoning of funds from the company.