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SEBI imposes ₹624-crore penalty on Anil Ambani, bans him from capital market

The Securities & Exchange Board of India (SEBI) has restrained Reliance ADA Group chairman Anil Ambani from accessing the securities market and prohibited him from buying, selling securities for a period of 5 years for his alleged involvement in diversion of funds from Reliance Home Finance Ltd (RHFL), which was promoted by Group company Reliance Capital Ltd (RCL).

Ambani has also been restrained from being associated with the securities market, including as director or Key Managerial Personnel (KMP) in any listed company, holding, associate company of any listed company for a period of 5 years.

SEBI in its final order in the RHFL case has imposed penalty of ₹25 crore on Ambani.

While 21 entities have been fined ₹25 crore each for their alleged involvement in the case, RHFL’s KMPs Amit Bafna, Ravindra Sudhalkar and Pinkesh R Shah have been fined ₹27 crore, ₹26 crore and ₹21 crore respectively. A fine of ₹6 lakh has been imposed on RHFL. The total penalty amount works out to be about ₹624 crore.

In a detailed final order running into 222 pages, SEBI Whole Time Member Ananth Narayan G said, “Certain KMP under the instruction of Noticee No 2 [Anil Ambani] who was not holding any position of governance of RHFL, systematically stripped the company’s assets in blatant defiance of RHFL’s board of directors.”

“I also note that investigation in the matter has concluded that the noticees [KMPs & entities] were involved in perpetrating a fraudulent scheme by disbursing General Purpose Working Capital (GPC) loans resulting in erosion of the company’s finances due to such loans eventually being declared NPA,” he wrote in the order.

“I note that Investigation Report and Interim Order contain repeated references to promoter-linked entities being the beneficiaries of the funds diverted from RHFL,” he stated.

“I am of the view that there is a need to quantify such gains and ascertain the real beneficiaries behind the web of companies,” he observed. “Illegal gains if any must be quantified. Noticees who have made the said gains must be identified,” he wrote in the order.

Castigating Bafna, Sudhalkar and Shah for allegedly aiding diversion and misuse of funds of a listed company for the benefit of other Reliance ADA Group entities, the SEBI order said they had “exhibited gross misconduct and unprofessional behaviour while approving GPC loans leading to erosion of shareholders’ wealth.”

“Considering the egregious nature of the fraud perpetrated in this case, I am of the view that maximum penalty must be imposed on noticees except against RHFL and Mr. Shah,” the SEBI Whole Time Member said.

The order posted on SEBI website on Friday (August 23, 2024) has come into force with immediate effects. The SEBI had ordered an investigation into the case after getting multiple complaints from investors about alleged diversion of funds from RHFL by promoter group entities.

Even though the company’s board had expressed serious concerns about the advances being provided under GPC loans and had asked the KMPs not to sanction such loans, no one paid heed.

As per the order loans extended by RHFL to corporates had skyrocketed from ₹3,742.60 crore in FY18 to ₹8,670.80 crore in FY19. 70 loans amounting to ₹6,187.78 crore were GPC loans disbursed in FY19 as per the order. A response from Reliance ADA Group or Ambani is awaited.