Industrialist Anil Ambani and 24 other entities, including former senior officials of Reliance Home Finance, have been banned from the securities market for five years by the markets regulator Securities and Exchange Board of India (Sebi) for diverting cash from the company.
Ambani has been fined Rs 25 crore by Sebi and is prohibited for a period of five years from having any affiliation with the securities market, including acting as a director or Key Managerial Personnel (KMP) in any listed business or intermediary that is registered with the regulator.
In addition, Reliance Home Finance was fined Rs 6 lakh by the regulator and prohibited from the securities market for a period of six months.
Sebi disclosed in its 222-page final ruling that Anil Ambani and senior RHFL executives had planned a fraudulent scheme to siphon off money from RHFL by pretending to lend it to firms affiliated with him.
The management rejected the RHFL Board of Directors’ clear directives to stop such lending practices and to frequently evaluate company loans.
Sebi came to the conclusion that Ambani and the RHFL KMPs were responsible for carrying out the fraudulent plan, which involved transferring money through conduit borrowers who were not creditworthy and were all connected to Ambani.
Sebi observed that loans totaling hundreds of crores were granted to businesses that had minimal or no assets, cash flow, or income, indicating that these loans were made with intentional intent. Due to the majority of these debtors’ defaults, RHFL’s debt eventually defaulted as well and was resolved under the RBI Framework. Public stockholders suffered large losses as a result, including more than 9 lakh investors.
As the fraud was discovered, RHFL’s share price, which was Rs 59.60 in March 2018, fell to Rs 0.75 by March 2020.
Amit Bapna, Ravindra Sudhalkar, and Pinkesh R Shah, three former RHFL executives who were instrumental in the scam, were among the 24 restrained entities that Sebi penalized. Ambani was fined Rs. 25 crore, Shah Rs. 21crore, Bapna Rs. 27 crore, and Sudhalkar Rs. 26 crore.
Reliance Unicorn Enterprises, Reliance Exchange Next Ltd, Reliance Commercial Finance Ltd, Reliance Cleangen Ltd, Reliance Business Broadcast News Holdings Ltd, and Reliance Big Entertainment Pvt Ltd were among the other firms on whom fines totaling Rs 25 crore were levied.
These organizations served as middlemen in the fraudulent diversion of RHFL’s resources or as receivers of the pilfered money.
The decision follows an interim order issued by Sebi in February 2022 that had previously prohibited RHFL, Anil Ambani, and three other individuals from trading stocks due to allegations of embezzlement from the company.
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