SEBI imposes Rs 25 cr penalty on Anil Ambani, bans him from market for 5 yrs

The total penalty on Ambani and other 24 entities works out to over Rs 625 crore.

Shares of Anil Ambani group companies plunged on the stock exchanges after the SEBI order. Reliance Power fell 5 per cent, Reliance Infra 10.4 per cent and  RHFL 4.90 per cent.

The regulator’s investigation uncovered that significant funds were misused under the leadership of Anil Ambani and other key figures associated with the company. It concluded that these entities were involved in siphoning off money, leading to a violation of the securities laws and a breach of investor trust.

“Investigation in the matter has concluded that the Noticees 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,” the order signed by SEBI Whole Time Member Ananth Narayan G said.

According to the Sebi, the 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’ — entities associated or linked with Noticee 2 (Anil Ambani).

In a detailed order, SEBI outlined the involvement of each entity and the specific roles they played in the diversion of funds.

According to SEBI’s investigation, the scheme was administered by Key Managerial Personnel (KMPs) of RHFL, who structured loans to credit unworthy conduits and onward borrowers. These borrowers were closely linked to the promoters, raising serious concerns about the misuse of company funds.

The fraudulent loans, which were disbursed as general-purpose working capital loans, led to a significant erosion of RHFL’s finances, Sebi said. “Most of the GPCL borrowers’ accounts turned into NPAs and as a consequence of the same, RHFL defaulted in its payment obligations towards its lenders which has culminated in its Resolution under RBI Framework.  As a result, the company’s public shareholders have been left high and dry,” the order said.

“It is apparent that noticees 3 to 5, KMPs of the company, played an active role in perpetrating the fraudulent scheme,” the order said.  While Noticee No. 2 was not a director in RHFL, he has used his position as ‘Chairperson of the ADA group’ and his significant indirect shareholding in the holding company of RHFL to orchestrate the fraud thereby not just adversely affecting RHFL’s stakeholders but also the confidence in the integrity of governance structures in regulated financial sector entities, the order said.

“As per material available on record, subsequently, the entire outstanding of the GPCL lending of INR 6931.31 crore as on September 30, 2021 has been classified as NPA. RHFL has disclosed that GPCLs were secured against tangible and intangible assets,” Sebi said.

“However, as observed earlier… dealing with diversion of funds, the said GPC Loans were secured against current assets of borrowers which were negligible. It transpires now that all the GPC Loan borrowers covered in this order, and the entities they appeared to transfer or forward the funds to, were all connected to the promoter group in some form or another,” it said.