SEBI Bars Anil Ambani and 24 Others from Securities Market for 5 Years

The markets regulator, 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 due to their involvement in the diversion of company funds. 

Additionally, SEBI has levied a ₹25 crore penalty on Ambani and prohibited him from holding any position, such as director or Key Managerial Personnel (KMP), in any listed company or any intermediary registered with SEBI for five years.

Furthermore, Reliance Home Finance has been barred from the securities market for six months, and a fine of ₹6 lakh has been imposed on the company. In a detailed 222-page final order, SEBI concluded that Anil Ambani, with the assistance of RHFL's key managerial personnel, executed a fraudulent scheme to siphon off funds from RHFL by disguising them as loans to entities connected to him. 

Although the Board of Directors of RHFL had issued strict directives to halt such lending practices and regularly reviewed corporate loans, these directives were ignored by the company's management.

This situation indicates a severe governance failure, influenced by certain key managerial personnel under Anil Ambani's direction. SEBI's findings suggest that RHFL as a company should not be held as responsible as the individuals directly involved in the fraud. The other involved entities were found to have either received illegally obtained loans or acted as conduits for the illegal diversion of funds from RHFL. 

SEBI highlighted that the investigation established the existence of a "fraudulent scheme" orchestrated by Anil Ambani (referred to as Noticee No. 2) and executed by the KMPs of RHFL to siphon off funds from the publicly listed company by structuring them as loans to unworthy borrowers who were, in turn, connected to Ambani.

Ambani exploited his role as the 'chairperson of the ADA group' and his substantial indirect shareholding in RHFL’s holding company to orchestrate the fraudulent activities. SEBI's order on Thursday pointed out the reckless approach of the company's management and promoter in approving loans worth hundreds of crores to companies with minimal assets, cash flow, net worth, or revenue, hinting at a malicious intent behind these loans.

The situation became even more suspicious given that many of these borrowers were closely linked to the RHFL promoters. Most of these borrowers eventually failed to repay their loans, leading RHFL to default on its own debt obligations and subsequently undergo resolution under the RBI Framework, leaving its public shareholders in a challenging situation.

For instance, in March 2018, RHFL’s share price was around ₹59.60. By March 2020, as the scale of the fraud became apparent and the company’s resources were depleted, the share price had fallen drastically to just ₹0.75. Despite this, over 9 lakh shareholders remain invested in RHFL, facing significant losses. 

The 24 barred entities include former key officials of RHFL:

•    Amit Bapna, 
•    Ravindra Sudhalkar, and
•    Pinkesh R. Shah*

(*Remaining names to be announced)

These officials have also been fined by SEBI 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.    

Moreover, additional 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,*

(*Remaining names to be announced) 

Additionally, each entity has also been fined ₹25 crore as penalty. These fines were imposed due to their roles in either receiving the illegally obtained loans or facilitating the illegal diversion of funds from RHFL. 

In February 2022, SEBI had issued an interim order that barred Reliance Home Finance Ltd, Anil Ambani, and three other individuals (Amit Bapna, Ravindra Sudhakar, and Pinkesh R. Shah) from the securities market pending further orders related to the alleged siphoning of funds from the company.