SEBI bans Anil Ambani and 24 others from securities market for 5 years

The Securities and Exchange Board of India (SEBI) has imposed a five-year ban on industrialist Anil Ambani and 24 other entities, including former key officials of Reliance Home Finance Ltd (RHFL), from participating in the securities market.

This action comes in response to a significant case of fund diversion from RHFL orchestrated by Ambani and his associates.

SEBI has levied a substantial penalty of Rs 25 crore on Anil Ambani and has barred him from holding any position as a director or Key Managerial Personnel (KMP) in any listed company or intermediary registered with the regulator for the next five years. RHFL itself has been prohibited from accessing the securities market for six months and fined Rs 6 lakh.

According to SEBI's 222-page final order, Anil Ambani, leveraging his role as the chairman of the ADA Group and his indirect shareholding in RHFL's holding company, executed a fraudulent scheme. He collaborated with RHFL's key managerial personnel to siphon off funds by disguising them as loans to entities linked to him.

Despite strong directives from RHFL's Board of Directors to cease such lending practices, the company's management, influenced by Ambani, continued these activities. This neglect highlights a severe governance failure within the company, driven by key managerial personnel under Ambani's control.

SEBI's investigation revealed that the funds were diverted to companies that were either recipients of the illegally obtained loans or acted as intermediaries to facilitate the diversion. The findings confirmed the existence of a fraudulent scheme led by Ambani and administered by RHFL's key personnel. These funds, presented as loans to financially unstable entities closely linked to RHFL's promoters, were not repaid, leading to RHFL's default on its debt obligations.

The regulator pointed out that the company's management and promoter showed a reckless disregard in approving loans worth hundreds of crores to companies with little to no assets, cash flow, net worth, or revenue. This approach was not only irresponsible but suggested a deliberate intent to misuse the funds. As a result, many borrowers defaulted, leading to significant financial losses for RHFL, which eventually entered resolution under the Reserve Bank of India's (RBI) framework, leaving public shareholders in a precarious position.

For instance, RHFL's share price dropped dramatically from Rs 59.60 in March 2018 to just Rs 0.75 by March 2020, as the full extent of the fraud became evident. Even now, over nine lakh shareholders remain invested in RHFL, facing substantial losses.

Among the 24 entities banned by SEBI are former RHFL officials Amit Bapna, Ravindra Sudhalkar, and Pinkesh R Shah, who have been fined Rs 27 crore, Rs 26 crore, and Rs 21 crore respectively for their involvement in the case.

Additionally, several other entities, including 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, have each been fined Rs 25 crore for either receiving the illegally obtained loans or facilitating the illegal diversion of funds.

This final order follows an interim order issued by SEBI in February 2022, which had already barred Reliance Home Finance Ltd, Anil Ambani, and three others from the securities market pending further investigation into the alleged siphoning of funds from the company.