SEBI bans industrialist Anil Ambani, 24 other entities from securities market

Markets regulator Sebi has barred industrialist Anil Ambani 24 other entities including former key officials of Reliance Home Finance from the securities market for five years for diversion of funds from the company reported news agency PTISebi has imposed a penalty of Rs 25 crore on industrialist Anil 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 yearsAlso the regulator barred Reliance Home Finance from the securities market for six months and slapped a fine of Rs 6 lakh on itIn its 222page final order Sebi found that industrialist Anil Ambani with the help of RHFLs key managerial personnel had orchestrated a fraudulent scheme to siphonoff funds from RHFL by disguising them as loans to entities linked to him reported PTIAlthough the Board of Directors of RHFL had issued strong directives to stop such lending practices and reviewed corporate loans regularly the companys management ignored these ordersThis suggests a significant failure of governance driven by certain key managerial personnel under the influence of industrialist Anil Ambani reported PTIGiven these circumstances the company RHFL itself should not be held equally responsible as the individuals involved in the fraudFurther 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 reported PTISebi 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 ie entities associated linked with Noticee 2 Anil Ambani reported PTIAmbani used his position as chairperson of the ADA group and his significant indirect shareholding in the holding company of RHFL to orchestrate the fraudSebi in its order on Thursday noted the cavalier approach of the companys management and promoter in approving loans worth hundreds of crores to companies that had little to no assets cash flow net worth or revenueThis 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 reported PTIEventually most of these borrowers failed to repay their loans causing RHFL to default on its own debt obligations This led to the companys resolution under the RBI Framework leaving its public shareholders in a difficult positionFor example in March 2018 RHFLs share price was around Rs 5960 By March 2020 as the extent of the fraud became clear and the company was drained of its resources the share price had plummeted to just Rs 075 reported PTIEven now over 9 lakh shareholders remain invested in RHFL facing significant lossesThe 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 them for their role in the case reported PTIAlso the 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 ShahAdditionally the remaining entities including Reliance Unicorn Enterprises Reliance Exchange next Lt Reliance Commercial Finance Ltd Reliance Cleangen Ltd Reliance Business Broadcast News Holdings Ltd and Reliance Big Entertainment Private Ltd have been imposed a penalty of Rs 25 crore each reported PTIThese fines have been levied on them for either receiving the illegally obtained loans or acted as intermediaries to facilitate the illegal diversion of funds from RHFLIn February 2022 markets watchdog Sebi had passed an interim order and restrained Reliance Home Finance Ltd industrialist Anil Ambani and three other individuals Amit Bapna Ravindra Sudhakar and Pinkesh R Shah from the securities market till further orders for allegedly siphoning off funds from the companyWith inputs from PTI